INFORMATION ON LAS VEGAS HOME SALES!

 Three new waves of

defaults seen breaking.

The first two waves of mortgage losses are mostly behind us but three more waves are coming, two of them in the housing market and one in commercial real estate, an executive for a New York investment firm said Friday.

There's more pain to come, said Whitney Tilson, principal of T2 Partners and publisher of a June report on the housing and credit crisis.

While the majority of mortgage defaults so far have been subprime borrowers, more middle- and upper-income homeowners are starting to walk away from their mortgages, he said from New York.

Roughly one-fourth of homeowners with a mortgage owe more than the home is worth, making them much more likely to default. Among those who purchased in the past five years, 30 percent are underwater. The figures are worse in bubble markets such as Las Vegas, where 61.4 percent of buyers in the last five years are underwater, according to Moody's Economy.com.

The early wave of defaults came from fraud and speculation, starting in late 2006 when home prices started to fall, Tilson said.

The next wave was borrowers who went into "payment shock" when their adjustable mortgage rates reset. Two-year teaser subprime loans written in early 2005 started to reset in early 2007, though those defaults are tapering off as low interest rates mitigate the shock.

Tilson, author of "More Mortgage Meltdown," is now seeing the third wave of prime loans defaulting due to job losses and home price declines. Prime loan default rates have jumped from 0.5 percent to 4.5 percent in the last year, he said.

In California, the average mortgage owed on homes in foreclosure is $412,000, while the average appraised value of those homes is only $235,000. That's going to cause a lot of people to walk away from their obligation, Tilson said.

"The average person in foreclosure in California is 43 percent underwater, so it's not like these people are close to the edge and you can save them with a loan modification," he said. "These people are deep, deep underwater. Are you going to keep paying when you're that far underwater?"

A fourth wave of prime jumbo loans, second liens and home equity lines of credit started to swell in early 2008, again created by job losses and home price declines.

When both the husband and wife were working, they could afford a big mortgage, Tilson said. Now, with 10 percent unemployment and some 3.5 million job losses, they're tightening their belts.

"It's not just unemployment, it's underemployment, people taking cuts in pay and working fewer hours. So what you're seeing is the middle and high end start to tip over," he said.

Wave No. 5 involves losses among loans outside the housing sector, the largest being $3.5 trillion in commercial real estate. Commercial mortgage delinquency rates have doubled since early 2008.

Tilson thinks housing prices will reach the fair market value trend line when they fall 40 percent from their peak based on the S&P Case-Shiller index, which implies a further decline of 5 percent to 10 percent from the first quarter.

"It's almost certain that prices will reach these levels," Tilson said. "The key question is whether housing prices will go crashing through the trend line and fall well below fair value. Unfortunately, this is very likely."

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How many homes do banks really own?  

Housing analysts and Realtors have long speculated about how many foreclosures are lurking in the Las Vegas market.

Foreclosures have dominated the housing market with more than 60 percent of the sales each month being bank-owned properties. That continues to drive down prices.

With sales at their highest level since June 2006 and first-time homebuyers and investors gobbling up inventory, it has raised the question of whether lenders will flood the market with a backlog of foreclosures.

Some analysts have suggested that banks may have as many as 25,000 homes in foreclosure inventory that they have been holding back to prevent prices from dropping too far.

Dennis Smith, president of Home Builders Research, says the inventory of existing homes continues to be a hot topic. He says that if you supplement the Multiple Listing Service data with daily anecdotal information that comes from Realtors, it appears the inventory of existing homes has reached the point where major banks will soon start releasing some of their foreclosure properties that they have been holding back.

That could mean thousands of homes that banks will want to clear from their books, Smith says.

“Realtors who specialize in foreclosures and bank-owned properties are certainly gearing up for a flood of listings during the upcoming weeks,” Smith says.

Based on a recent calculation by a Realtor friend of Smith, there are about 11,100 single-family homes for sale without an existing offer, he says. That translates into about a three to four months of inventory, Smith says.

There were 5,276 bank-owned single-family homes listed for sale in the valley and of those 2,623 had contingent offers, Smith says. That leaves an inventory of 2,653. About half of those homes don’t have offers.

“This substantiates what we have been hearing for weeks,” Smith says. “There are very few (bank-owned) single-family homes that are currently available without offers to buy. If this is what the banks are waiting for, it has arrived. It is not going to change the downward pricing trend of the resale segment for some time yet. However, it is the first real positive sign that there is definitely a light at the end of our tunnel.”

How many homes will be released because of this limited supply is yet to be determined, Smith says. The question is whether there will be enough demand to absorb that inventory.

“Some of the Realtors I respect believe there are plenty of investors and demand from out-of-town people,” Smith says. “However, I believe it is too early to make that call, and they are basing their opinion on hope. Until we know how many properties are going to be released in the marketplace, it is impossible to forecast how long it will take to absorb them.”

Although there are a lot of investors who are active in Las Vegas to take advantage of the low prices, Smith points out that UNLV reports 30,000 vacant homes.

Many investors have been able to get a 12 percent return from rentals, Smith says. But because the sales to investors have increased the rental supply, that return has dropped to about 10 percent.

“If the return on their investment continues to soften, we will see many of the investors stop buying homes,” Smith says. “Although it would hurt the short-term numbers, it might be for the good of the long-term status of the housing market. 

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Las Vegas Bank-owned homes gobbled up!

The good news in Las Vegas is that bargain-hunting buyers are chomping through the foreclosure inventory at a faster pace than other parts of the nation.

Existing-home sales increased 77 percent in the first quarter to 9,122, and roughly two-thirds of those sales were bank-owned properties, said Larry Murphy, president of SalesTraq, a Las Vegas-based research firm.

He counted 2,376 bank-owned dispositions in March, compared with 1,846 acquisitions, leaving bank-owned inventory at 15,954 properties. It's the first time dispositions have outnumbered acquisitions since Murphy started keeping track.

"It could be a fluke," he said. "I'm curious to see if it happens twice."

Clark County had 4,863 foreclosures for April, down 37.2 percent from 7,747 in March, but up 154 percent from 1,911 in the same month a year ago, Sacramento, Calif-based Foreclosures.com reported.

Preforeclosure filings, which start with a notice of default, dropped to 8,639 in April from a record 11,593 in March. There were 4,426 Clark County preforeclosure filings in April 2008.

Banks have also become more sophisticated and savvy with REO pricing, Murphy said. They'll list a foreclosure at below-market value to create competitive bidding between interested parties, bringing in multiple offers and getting a better price in the final analysis, Murphy said.

The median price of a foreclosure sale in March was $127,500, compared with $149,900 for homes that were not bank-owned, SalesTraq reported.

"The multiple bids for homes under $200,000 are here for a while," Steve Hawks of Platinum Real Estate Professionals said. "The homes under $200,000 are in short supply, and then you have investors competing with first-time homebuyers to make it even more competitive."

As for bidding wars, buyers don't want to overbid on a foreclosure home because it might not appraise high enough for the loan, Hawks said.

"The cash buyer can bid as high as they want, so in this market, the edge goes to the investor with cash," he said. "Don't count the builders out. Frustrated buyers can take heart that builders have retooled and are building smaller homes, which will increase supply for first-time homebuyers."

Banks need cash and their bulging portfolios of "hidden" foreclosure inventory are one way to help them get it, said Alexis McGee, president of Foreclosures.com. If they price the homes right, it could translate to incredible deals for consumers on bank-owned foreclosure inventory, she said.

"This isn't a pipe dream amid a recession with 8.9 percent national unemployment and foreclosures at all-time highs," McGee said. "Now is the time for homebuyers and investors to press capital-hungry banks to unload their phantom REO inventory."

The "phantom" inventory is lender-repossessed properties that are not showing up for sale on the Multiple Listing Service. Only about 30 percent of REOs are listed on the MLS, McGee said.

"This is a staggering low number," she said. "That leaves 70 percent of lender-owned REOs that no one knows about potentially available for sale."

The number of REO listings in Las Vegas had been declining since February, when certain foreclosure moratoriums were enacted by Fannie Mae and Freddie Mac, as well as by some of the large lenders, Frank Nason of Residential Resources said.

He saw a 5 percent drop in the first week of May from the previous week, the largest weekly drop since he's been tracking the statistics.

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Pardee goes back to building new houses

New construction signals good news for industry

Pardee Homes is moving forward with new home construction at several Las Vegas Valley neighborhoods. Many industry watchers are calling this a positive sign for the market.

"The fact that we're focusing our efforts on new construction is an indication that we've finally moved through a majority of our inventory homes," said Southern Nevada Division President Klif Andrews.

"And, this is good news for buyers who once again have a choice in decisions such as cabinets and countertops and great options through our LivingSmart program."

All of Pardee's newly designed homes are part of the builder's LivingSmart brand, a program with standard and optional features that boost energy efficiency, save water, improve indoor air quality and encourage material conservation and the use of recycled or sustainable resources, Andrews said.

LivingSmart provides standard materials, systems and features with EnergySmart, EarthSmart, WaterSmart and HealthSmart advantages. To these, buyers can add water conditioning, tankless water heaters and central vacuum systems. Optional features vary by home and neighborhood.

Presently, Pardee has new homes under construction at Solamar in the Centennial Hills area in northwestern Las Vegas, Montclaire in the Anthem area of Henderson and Bella Fiore at Lake Las Vegas Resort.

Construction will start this month on new homes at Northpointe and Riverstone in North Las Vegas and Rosetta in Mountain's Edge.

"It continues to be an exceptional time to purchase a new construction home, which typically has a higher level of features as well as lower prices than inventory homes and foreclosures. The best deals aren't limited to existing homes," Andrews said.

Andrews said he believed buyers lost the opportunity to make many decisions in their new homes over the past several months as builders, including Pardee Homes, worked to sell inventory homes.

"New construction allows us to go back to our preferred way of business and that is to give our customers a choice in personalizing their new home.

Solamar includes one- and two-story floor plans that range from 2,491 to 3,152 square feet with as many as five bedrooms. Home sites average 7,000 square feet, and home prices start from the high $200,000s.

CALL ME @ (702) 808-4561 FOR A PRIVATE TOUR OF ALL THEIR MODELS.

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REAL ESTATE: Las Vegas home sales soar by 78 percent

Median price falls by nearly 40 percent.

Las Vegas is emerging as a national leader in the housing market recovery with 13 consecutive months of increasing home sales, though the trend of declining prices continued in April, the Greater Las Vegas Association of Realtors reported Friday.

Realtors sold 3,198 single-family homes in April, a 78.3 percent increase from the same month a year ago. Sales have more than doubled for the first four months of the year.

However, the median price dropped 39.9 percent to $141,720 as bank-owned properties dominate the market, accounting for about 80 percent of all sales and driving prices down.

The inventory of homes for sale, which peaked above 24,000 in 2007, has steadily declined to 22,112 in April, down 3.6 percent from a year ago.

With home prices dropping and 30-year, fixed-rate mortgages at historical lows, buyers are finding opportunities for affordable homeownership in Las Vegas, said Sue Naumann, president of the Greater Las Vegas Association of Realtors.

"I've had good luck lately," she said. "I have a first-time buyer of a foreclosure through FHA (the Federal Housing Administration). We're just waiting for it to close. I have a cash buyer, a retiree from California. I haven't sold to as many investors lately, but I get a lot of inquiries."

Dan Van Epp, principal of Van Epp Cos., said inventory declined because of the Fed's moratorium on foreclosures from November through March. California also saw foreclosure sales drop to almost nothing as most of those foreclosures were left over from the last quarter of 2008, he said.

"We are beginning to see the bottom of this mess, but we're not in a climb out of it," Van Epp said.

California foreclosure activity is expected to pick up for the rest of the year and peak in the fourth quarter, and Van Epp said he predicts the same trend for Nevada.

Banks are not in a position to "fool around" with negotiations when they put a real estate-owned property on the marketplace, he said. They calculate what the market value is and drop the price a little from there to line people up for multiple bids. That's why the spread in the bid-versus-cash equation is quite narrow, Van Epp said.

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LAS VEGAS HOME SALES ARE RISING !

 

Where is the Las Vegas Market Headed ?

Website: www.elzieyates.com

Real Estate and Development

NEWS UPDATE

CALL: 702-808-4561

EMAIL: yelzie@hotmail.com

 DON'T MISS OUT ON THE GOLDEN AGE FOR FIRST-TIME HOME BUYERS.

Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers.

Then, everyone who sat on their down payment savings accounts for a few years too long will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime for those who can qualify for a mortgage.

Unfortunately, we do not know when this golden age will begin, because we will be able to identify a bottom to the housing market only with the benefit of hindsight. But as it does with the stock market, the moment will probably arrive when everyone is feeling the most pessimistic.

That moment is certainly getting closer. Housing prices have fallen drastically from their peak levels in many areas of the country. Rates on 30-year fixed-rate mortgages are already close to 5.5 percent, and this week there were suggestions that the federal government might try to drive them down to 4.5 percent, a truly incredible figure to be able to lock in for three decades.

Meanwhile, first-time home buyers have the same advantage they have always had, which is that they do not have to sell their old place before buying a new one. That is an added advantage in areas where many available houses simply are not moving, because the people trying to sell them will not be bidding against you.

If you’re hoping for a recovery in the housing market, you ought to be cheering on the first-time home buyers. When they purchase homes, their sellers are free to move on or move up, stimulating further sales.

But if you are a potential first-time buyer yourself, or lending or giving the down payment to one, you are probably as frightened as you are tempted by all the “For Sale” signs that have become “On Sale” signs. So let’s quickly review some of the still-grim pricing data in certain areas — and consider the reasoning offered up by first-time buyers who have forged ahead anyhow. Hope you enjoyed this article.

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 LAS VEGAS HOME SALES ARE RISING !

With Las Vegas having more than 29,000 homes, townhouses and condos on the market, the Southern Nevada Home Builders Association released a report last month that the region would have a shortage of workforce housing by 2009.
The report, drafted by Las Vegas consulting firm Applied Analysis, said it's possible because of the opening of resorts on the Strip in 2009 and 2010. The creation of jobs will fuel the demand for migration to Las Vegas and the need for more homes, the report said.
If that is true, it means people looking for bargains better buy homes in 2008 because strong demand will only increase housing prices.
"We think it is a matter of grave concern to the community," said Monica Caruso, spokeswoman for the homebuilders. "With the resorts opening, that is going to bring in tens of thousands of jobs, and our industry has to rachet up to address workforce housing at the end of 2009. People are well served to get a roof over their head quickly. We are going to have no place to live, and people are going to have to double up and triple up."
The dire nature of what the report is predicting has prompted another Las Vegas analyst, Restrepo Consulting, to announce that the firm and other analysts are reviewing the report to see if that scenario will unfold. Restrepo says the housing report will be referenced in a study it is doing on economic diversification for the Southern Nevada Regional Planning Coalition, which is composed of local government entities.
Restrepo said the firm has put together a consortium of national, regional and local consulting firms with extensive experience in evaluating housing markets across the country to look at the report. If the firm's findings are supported, they pose some interesting challenges for homebuilders and for recruiting workers to Southern Nevada. The message will be going out that Las Vegas has a housing shortage and that potentially means more expensive housing, it says.
"We have been asked by a number of our private-sector and public clients to evaluate the assumptions and methodologies in that report to see if it makes sense," Restrepo said. "We are trying to replicate the same conclusions. It has an effect on recruiting companies to Southern Nevada. We already have some challenges we are facing and if the message goes out, and if it is a true message, it is what it is, and we will support it completely. Our clients just want us to make sure the report is valid so, if there is a housing shortage, we need to plan accordingly."
Applied Analysis Principal Jeremy Aguero says his projections were based on the demand for employees, and he is confident in his report and has vetted the numbers. But he admits when it comes to analysts, reasonable minds can differ, he says.
"We feel comfortable with it," Aguero said.
The homebuilders are confident in the report and stand by it, Caruso said. Applied Analysis is one of the top firms in the community and works for state and local governments.

Elzie Yates & Associates
Call: (702) 808-4561    or 702-807-4561  Fax: (702) 368-4561
Website: www.elzieyates.com