The Vegas Bubble News

We are known as the Foreclosure capital of the world and the Gambling capital also (along with several other various title’s).

 With the current  reluctance of most lenders to follow through on foreclosure on anyone for any reason, Short sales are the name of the game now.

During at least the next five years are so we expect Short sales to dominate all types of real estate sales in Las Vegas.  With Prices not expected to get back to the lofty 2005 Heights at least for 20+ years -everyone will  have to get used to the ever improving short sale. 

read a new article in todays Sun:

Las Vegas and the state may be changing from the nation’s foreclosure capital to a housing market dominated by short sales.

In the last four months of 2009, the number of foreclosure sales has dropped and lenders have consented in greater numbers to short sales — in which they allow homes to be sold for less than the owner owes on the mortgage. That trend should continue in 2010, according to Realtors and housing analysts.

The statistics prove that as well.

Research firm Applied Analysis reported fewer than 300 short sales a month on average in the first four months of 2009 based on homes sold on the Multiple Listing Service. In May the numbers slowly started increasing, and over the last two months, short sales have averaged close to 700 a month. January has similar numbers, said Brian Gordon, Applied Analysis principal.

Short sales averaged about 7 percent to 8 percent of total existing-home closings in early 2009, but averaged 22 percent of the market by the end of the year and in early January, he said.

SalesTraq, another research firm, reported that foreclosures made up 50 percent of existing-home closings in 2009 compared with 67 percent to 70 percent in 2008. The reason is short sales made up a bigger chunk of sales.

“We have seen a decrease in foreclosure activity in Las Vegas, which was puzzling to us,” said Daren Bloomquist, marketing manager for California-based RealtyTrac, which monitors foreclosures in Nevada. “Maybe Las Vegas has become somewhat of a test ground for streamlining short sales. It sounds like it could have an impact in Las Vegas.”

Traditionally, a short sale has been a time-consuming process that for much of the housing downturn has been unsuccessful as lenders prefer homes going into foreclosure. Now, lenders are trying to streamline the process.

One analysts said only one in four short-sale attempts were successful in 2009.

Short sales make financial sense for lenders, analysts said.

In Las Vegas, banks make $80 per square foot on foreclosures but $130 per square foot on average in short sales, said Steve Bottfeld, executive vice president of Marketing Solutions.

“I think the bottom line is that short sales ultimately replace foreclosures because of the financial impact on the financial institutions,” Bottfeld said. “The banks are going to look at it differently and opt for more short sales.”

Analysts said short sales will get a boost in 2010 because of a push by the federal government. The Treasury Department is offering incentives on short sales by providing a $2,500 subsidy, $1,000 to the servicer and $1,500 to the seller for moving expenses. In addition, investors can get $1,000 by allowing subordinate lenders to get $3,000 in proceeds from the sale. The program is effective April 5, but servicers can implement it earlier.

Dennis Smith, president of Home Builders Research, said short sales will be the “story of the year” because of the effect they will have on the housing market.

“It should cause prices to increase a little,” Smith said. “We have seen prices flatten the last five to seven months, and one reason is because we haven’t been flooded with all these foreclosures. They are doing more short sales.”

John Mechem, a spokesman for the Mortgage Bankers Association, said what is happening in Las Vegas is occurring across the country. It is costly for lenders to go through the legal process of foreclosing, and he added that homes can be damaged over time. The return is better on short sale, he said.

Lenders just want to get the home back on the market as soon as possible, Mechem said. “They are not in the business of being landlords or property maintenance.”

Lenders’ willingness to approve more short sales has been a relief to Realtors who have been frustrated because they have worked on deals for more than a year in some cases, only to have the deal rejected in the end.

Linda Rheinberger, president of the Nevada Association of Realtors, said it appears short sales are the future as banks and asset managers catch on ways to avoid letting homes go into foreclosure.

“There is a lot of political and social pressure on banks, especially those that received stimulus money, and they have been highly encouraged to do this,” Rheinberger said.

Some analysts have suggested that the push for more short sales could lead to lenders’ willingness to reduce principal from mortgages and allow homeowners to stay in their home.

Robyn Yates, broker/owner of Windermere Real Estate, said with more than 75 percent of homeowners underwater — they owe more on their homes than the homes are worth — it’s unlikely lenders will agree to that.

“I don’t know how they can do that,” Yates said. “If you think about it, what would happen if 77 percent of homeowners went to the banks and asked their principal to be reduced?”

Bloomquist contends that short sales could be a better way to address the foreclosure problem than modifications because it includes a new borrower with a new loan that is based on reasonable lending standards, Bloomquist said.

“That could be much better for long-term success,” he said.

http://www.lasvegassun.com/news/2010/jan/29/short-sales-soar-while-foreclosure-sales-slacken/

Yes I was scared.   I wandered down to the planet known as “Nevada Legal News” not quite knowing what to expect on another strange rainy day in Vegas. What I was met with -set me back a bit.  

What are those things? are those Pods?,  Cocoons?    As I approached, I reached into my jacket to pull out my Laser Gun . Ripley would of been proud.   I was going to open fire on those little Alien creatures as soon as they morphed out of them. 

Such is life these days at the Local Trustee Sale.  The foreclosure/investor gammut seems to have made its way down to the areas where only a select few once treaded. Now at the the trustee sales, it is a very competitive setting.  

 Those Pods  are in fact Hunting Stations that are made to camoflauge hunters from Deer or other trophies but are now used for the purpose of Hunting Real Estate Deals.  Little nifty tents these were.   Some of the “hunters” had propane heaters and many had portable laptops with wifi. The smell of Subway subs rafted through some of the openings in these pods.  Every now and then some ramblings were heard -but mostly just quiet.

As I stood in the back , umbrella in hand, awaiting the bidding to begin, I couldn’t help but laugh at the scene.

At 10:15 am the little female auctioneer began the proceedings and many of the 400+ properties were started to be auctioned off (or rather postponed or cancelled ).    

Of course of the few ones that werent cancelled, many received alot of activity from the Aliens.  As the auctioneer quickly spitted out the info on the property(which amounted to the equivalent of the human ear trying to pick up a dog whistle), the Aliens came to life.  Opening bids came out of Pod #1  and then Pod #13 got into it -to increase the bidding. Soon several aliens were out bidding each other in a attempt to steal away the prize- A Local home perceived to be a good deal.  Quickly one of Alpha Aliens won the battle and the house was theirs.  Then after this round of bidding was over, they would escape from their pods and walk into the Legal news office to sign over their numerous Cashiers Checks of many denominations that were stashed in their pockets.

a Interesting process it was.  It seemed most were professionals who had the whole process down to a science. This is their life as they currently know it. And then there were some newbie investors and then some onlookers. It was hard not to over hear the many conversations.

  are you sure there is someone in that house , it was empty last night.

 That deal stinks , you overpaid for that.

Those guys have no idea what they are doing

It was pretty funny. and eye opening.  But the most amazing part was the apparant lack of margin on the winning bids to actual Property value on the Alien sales.

a example was this house:

2044 Wandering Dove 89134.   A  typical 1700 sq ft 2 story home located in Indian Hills- a average gated sub in Summerlin.  I put the value at 180k( I am very accurate with my values).

opening bid was 130k.  Okay decent room there.  Home is vacant and in apparantly good cond.  After the bidding was completed property sold at 157k.  And that doesnt include the costs as well as various HOA and other small Liens attached.   margin is at 5-10%.   Not enough in my book for the hassle.   Most of the sold ones were like this.

But every now and then a deal came on .  There was a 1900 sq ft one story in Sun City Summerlin on the golf course with some strip views.  Occupied however. sold for 243k and value is 310k.   But this was a rarity.  It seemed most shyed away from the occupied homes and many bid on the available vacant ones.

this kind of reminded me of some of the chaos of auctions and new home lotteries in 2003/2004.      Usually a top is in place when the masses are getting involved. Once the Goverment drip system is over and the deluge comes, will the Aliens seek another planet to conquer?

The latest Case- Shiller index released today shows Las Vegas Real Estate pricing has fallen for 39 consecutive months since its peak in 2006. Current pricing is exactly the same as it was in June of 2000.  What a ten years it has been.  If you factor in inflation current pricing is similar to what you had  in 1994.   But on the good side , it appears to be close to stabilizing -at least on the low end.

Las Vegas home prices as tracked in a monthly nationwide report fell in November for the 39th consecutive month.

Debt-rating agency Standard & Poor’s issued its S&P/Case-Shiller Home Price Indices today showing Las Vegas prices fell 0.5 percent from October to November; a deterioration from October when prices fell 0.1 percent from September.

Las Vegas prices are down 55.6 percent from their peak, Standard & Poor’s said.

S&P said prices nationwide in its 10-City and 20-City Composite Home Price Indices fell 4.5 percent and 5.3 percent, respectively, in November compared to the same month last year.

Las Vegas prices were off 24.5 percent year-to-year — the worst showing in the 20-city index — as the recession and associated foreclosures continued to depress prices in Southern Nevada.

“For Las Vegas, in particular, prices have declined for 39 consecutive months, with a peak-to-trough reading of -55.6 percent. It is now just 4 percent above its January 2000 level. This compares to its peak in August 2006, when the average home price was 135 percent above that same level,” S&P said in its report.

Nationwide, the index found mixed signals on the direction of housing prices.

“On balance, while these data do show that home prices are far more stable than they were a year ago, there is no clear sign of a sustained, broad-based recovery,” David Blitzer, chairman of the Index Committee at Standard & Poor’s, said in a statement.

The Case-Shiller numbers trail by one month statistics for existing home sales issued by the Greater Las Vegas Association of Realtors (GLVAR).

GLVAR reported that for December, the median price of single-family homes sold in Southern Nevada was $136,000, down 2.9 percent from $140,000 in November and down 22.3 percent from $175,000 one year ago.

The median price for condos and townhomes fell 4 percent, from $68,000 in November to $65,300 in December. That’s down 27.4 percent from $89,900 one year ago.

http://www.lasvegassun.com/news/2010/jan/26/report-fall-las-vegas-home-prices-reaches-39-month/

Id never thought I would see this article.  But here it is in print.

Now instead of the experts saying you have a moral obligation to pay your mortgage.  They are saying the opposite:

you have a moral obligation to walk away.    Wow  – a mortgage revolt!!  interesting!   The psychological tsunami continues to build- as predicted

Big real estate developers do it all the time – like yesterday, when the owner of New York City’s Stuyvesant Town complex decided to stop paying its $3 billion mortgage. So why are you still writing a check every month on that mortgage that’s much bigger than your home is actually worth?

Good question, University of Chicago economist Richard Thaler says. Thaler tells New York Times readers that it’s not just alright to walk away from one’s over-sized mortgage — it may actually be a moral imperative. (An earlier Times article, by Roger Lowenstein, said much the same thing.) After all, lenders had no second thoughts about lending more than many borrowers could afford or than the homes might actually be worth. It’s just not fair to expect borrowers to follow rules that the lenders don’t.

But why stop there? Some commentators are now calling on borrowers to start a mass mortgage strike.

Over the last year “Shadow Inventory ” has been a often heard name associated with a potential deluge of new inventory(mostly distressed) that is waiting to hit .

The term has been getting so popular that even people not in the real estate buisness discuss it and often ask me about it.

But what exactly is SHADOW INVENTORY?

Most commonly the name is associated with the  homes that the banks have foreclosed on but are holding back release onto the market. Many feel that there is a “conspiracy” as to the banks controlling the flow of inventory as to make the market seem hotter than it really is -through a apparant lack of inventory available for sale.

However as we have previously discussed most banks are not in the buisness to sit on inventory that they took back at the auction. this does them a disservice:

• the holding costs are huge-taxes,hoa,liens
• the condition of the homes will deteriote usually
• management of the assets costs money
• it does not make economical sense.

What we have shown is that most of the inventory that banks take back at the auction is immediately put into the re- sale process. This is not to say that some hoems are not held off the market. Fannie and Freddie seem to have been doing this much more than most.  

 not show up under inv

So with this being said here is what SHADOW INVENTORY IS and the estimate of total percentage:

1. most of this shadow is the banks delaying the foreclosure filing on 90 day plus delinquent borrowers (for many reasons which we are not priveledged to know)- 55%

2-banks cancelling and postponing trustee sales on homes that they have already filed the foreclosure notice (working out loan mods, short sales and stall tactics) – 30%

3-not releasing the inventory that the banks already hold title to( the above mentioned most popular theory but this amount is way behind #1 and #2) 7%

4-potential sellers who have not listed their homes due to various reasons but would like to sell (waiting for market to improve or finally decide to short sale their home) 6%

5-High rise condos- many hi rises do not show up on inventory- 2%

As you can see most of the shadow inventory is homes that the banks are delaying  foreclosing on (85%).

Of course some of this 85%will end up as loan mods and many will end up as successful short sales and a small percentage will be brought current by borrower.

But what of the ones that arent?   

Yes that is the magic question that will impact our market on the short term and longer term.

stay tuned….