The Vegas Bubble News

Artificial Goverment intervention=Lack of inventory = strange happenings in Las Vegas Market.

LAS VEGAS—Jonathan Griffin, Michael Pawlak and Chris Iuso all are chasing bargains on foreclosed homes here.

It should be easy. Las Vegas is one of the foreclosure capitals of the U.S., with about one in four households behind on house payments or in mortgage foreclosure. Yet all three of these shoppers—a professional real-estate investor, a county official with federal funds designated for stabilizing neighborhoods and an installer of security systems who needs a new place to live—are frustrated.

“I thought it would be a heck of a lot easier,” said Mr. Iuso, a renter who wants to buy a home but has been outbid eight times, usually by investors able to pay cash.

Bargain hunters here and in many other metropolitan areas are up against a paradox. By far the biggest wave of foreclosures since the Great Depression was expected to be a bonanza for anyone with cash or the ability to get a loan. But prospective home buyers say it is increasingly difficult to find foreclosed homes at attractive prices in desirable neighborhoods.

Supply is shrinking largely because of federal and state efforts to help millions of distressed homeowners avert foreclosure, which have delayed many likely foreclosures, keeping the homes off the market for now.

The bargain chase is even tougher for those buying with a loan. Investors with cash have an advantage in that their offers aren’t conditional on obtaining a loan, so banks often prefer selling to them than taking the risk that another offer will fall through.

Investors have complaints, too. “This market has been kind of saturated” by people looking for deals, says Mr. Griffin, the investor. More than 50 people show up daily for the auctions, about triple from a year ago, says Mr. Griffin.

Mr. Griffin represents and advises scores of investors who are trying to buy foreclosures here. Among Mr. Griffin’s regular clients is Rutt Premsrirut. “Last summer you could make good margins,” said Mr. Premsrirut. At so-called trustee sales of homes in foreclosure cases, he could win with bids at around 70% of the estimated market value. Now, he says, homes are likely to go for 85% to 90% of resale value. After accounting for real-estate commissions, repairs and other costs, that leaves little margin for error.

Also competing with the investors is Mr. Pawlak, head of community-resources management for Clark County, which includes Las Vegas. Mr. Pawlak leads a team charged with spending about $30 million of state and federal money awarded to the county to purchase foreclosed homes.

The federal money comes from the $6 billion Neighborhood Stabilization Program created by Congress in 2008. That program is supposed to help local organizations buy and repair foreclosed homes so they don’t drag down neighborhoods. Those organizations then sell or rent the homes to people with low or moderate incomes.

Mr. Pawlak says he is handicapped in vying with private investors. For one thing, federal rules require that he buy homes at a discount of at least 1% to appraised value. Appraisers are often more cautious than buyers in estimating values. He also can’t make an unconditional offer because the rules require his staff to check for toxic wastes, pests and compliance with building codes, among other things.

“We’re competing against people who say, ‘I’ll take 50 properties, sight unseen,’ and we just can’t do that,” Mr. Pawlak said.

Las Vegas home sales pass foreclosures By HUBBLE SMITH LAS VEGAS REVIEW-JOURNAL

Traditional home sales in Las Vegas exceeded foreclosures in January for the first time since June 2008, Las Vegas-based SalesTraq reported Tuesday. However, the majority of sales are still “distressed,” including short sales, or homes sold for less than the mortgage balance, SalesTraq President Larry Murphy said. The local housing market research firm showed 3,429 existing-home sales in January, a 24.1 percent increase from the same month a year ago. “It’s good, but over half were distressed sales, and that’s going to keep a lid on prices,” Murphy said. “Existing prices have languished between $120,000 and $125,000, and it’s probably going to stay there for the rest of this year as long as a majority of sales are distressed sales.” About 47 percent of existing sales were bank-owned homes, with a median price of $115,000. The remaining 53 percent were “traditional” sales, with a median price of $125,000. Overall, the existing median price dropped 20 percent from a year ago to $120,000 but has been around that level since April. Home Builders Research of Las Vegas reported 240 new-home sales in January, down 16 percent from a year ago. The median new-home price fell 14.3 percent to $200,716, a decrease of $33,457 from a year ago. The new year started off pretty much as expected, housing analyst Dennis Smith of Home Builders Research said. January’s new-home data reflect a lull from the rush to close escrow on homes in 2009, he said. “The Las Vegas new-home housing industry is what it is — a crippled major component of our struggling economy,” he said. The new-home building industry is nearly at a standstill, using government assistance programs as a “crutch” to sustain a presence in Las Vegas, Smith said. He counted 380 new-home permits in January. That number hasn’t topped 500 since July 2008. The resale segment has been the “main engine” of the residential real estate market for the past 12 months, Smith said. There were 3,111 resales in January, compared with 2,536 a year ago, he reported. New-home sales accounted for 10.5 percent of all escrow closings in 2009, compared with 41 percent in 2000. “That’s quite a change,” Smith said. Tim Kelly Kiernan of ReMax Pros in Las Vegas said prices have leveled off but probably will continue to decrease slightly. They vary among ZIP codes and among subdivisions, depending on the property’s condition, he said. Kiernan said he’s alarmed by the 9,563 trustee sales in January, or homes that have transferred deed of ownership to the bank. Even more alarming are the 130,000 trustee sales in 2009, he said. Not all of them go to foreclosure. Some are canceled, some are postponed, others are sold to third-party investors. Many of them are being held by the banks but will eventually be released onto the Multiple Listing Service, Kiernan said. “Banks are making positive strides in the area of short sales with the hope of avoiding having to sell these properties in foreclosure,” he said. Murphy of SalesTraq reported 1,351 real estate-owned, or bank-owned, acquisitions in January, compared with 2,367 in January 2009. REO dispositions totaled 1,628 in January, compared with 1,789 a year ago, bringing REO inventory down to 10,264 from more than 16,000 a year ago. “What I see is more of the same old data,” Murphy said. “We’re right on schedule for 24,000, 25,000 foreclosures in 2010.” Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.