Dear God, please let there be another oil boom, I promise not to piss it all away this time.

 

I know a lot of real estate agents and small business owners in Las Vegas that feel the same way about the real estate boom. If only they were so lucky to have their revenue equal to 2004….

Just some thoughts on another great chart that makes you go Hmmmm…

Paul Francis
Prudential Americana Group, REALTORS
Las Vegas Real Estate
702.592.3058

Billion underwater?

14 Billion more is owed then what it's worth

Most striking, though, was this finding from CoreLogic: Of the 50 U.S. metropolitan areas with the highest percentage of home mortgages underwater, Las Vegas was one of only two cities where total mortgage debt for the entire metro area exceeded total property value. And Las Vegas is far worse off than the other city, Orlando, Fla.

Vegas Home prices to Recover

Just released from CNN concerning real estate prices and it’s information that is certainly not new.

NEW YORK (CNNMoney) — Move over, Cleveland. Make room, Detroit. Beat it, Buffalo. There are some competitors for the title of America’s most depressed real estate market.

Read the Full Story Here by Les Christie, 01/07/2011.

When you read the article it makes it sound like Las Vegas is a city with no hope because home values are not going to be returning to their peak anytime soon.

Let’s make it clear… the return to peak home values that we saw in 2006 for Las Vegas happening in a decade or two is Absolutely no surprise but the return to $300,000 starter homes not coming anytime soon has more to do with how Peak Home values were reached in the first place then what the article is suggesting. Think lax lending standards with nothing down for the 2000′s, speculators that wanted to be real estate investors but had no clue what an investment was to begin with and a host of other factors that pushed Las Vegas home values far beyond what they should have been all combining to create a recipe for disaster. Any suggestion that 20%+ appreciation rates year in and year out leading up to the peak as something that is normal is completely ridiculous. Wake up and smell the coffee… the foreclosure fiasco disaster was set in place long before the first seller tried to sell and could not sell to cover the loan balance. Thinking that Las Vegas home values are just going to return to the peak levels anytime soon should have been given up well over a year ago

Back in September of 2009 I covered it a little more extensively and predicted that it would be more like 2040 for Las Vegas home values to return to the levels they were at the peak in 2006.

When Will Las Vegas Home Values Recover?

Read the above and the calculation involved in getting to those peak values. It’s nothing complicated in figuring out.

What is complicated to figure out is where they get these so called expert analysts you read in the mainstream media that come up with ludicrous comparisons that Las Vegas is the Next Detroit or Cleveland. Do they even bother to visit Las Vegas to see what is going on?

By the way Illinois residents… enjoy your income tax hike.  The state was out of control in it’s spending when I lived in Chicago…. where did you think they were going to get the money?

Paul Francis, CRS
Prudential Americana Group, REALTORS
Las Vegas Real Estate
702.592.3058

Pay your Association dues. Over the years of doing Las Vegas short sales I’ve seen more then a deal or two killed because Homeowner Association Dues were not paid and late fees, collection fees, interest charges, lien fees, paperwork fee, recording fee, postage and mailing fees were tacked on to the bill turning something that was reasonable to pay into something completely ridiculous.

Worst case scenario I was personally involved in was when one of my real estate investors was attempting to purchase a distressed short sale. We made it through to an acceptable price that the bank would agree to and then found out about the $13,000+ in past HOA dues and collection fees. The seller certainly could not afford to pay it, the bank did not want to pay it and my real estate buyer certainly was not going to pay for it. Result? The Home ended up going through foreclosure to the Trustee’s sale and becoming another blighted home in the community with dead landscaping and trash piled up on the front door. Hardly in the best interest of the community it was located in.

So… I have to kind of laugh when I see an article in the Las Vegas Sun where the collection agencies for the HOA’s call Las Vegas Real Estate Investors Greedy for not wanting to pay these fees.

HOA Collectors want to End Cap on Delinquent Fees and Foreclosures – 12/03/2010 – Buck Wargo

Investors argue state law limits the collections to nine months and the added fees are hurting their ability to invest and improve properties. Collection companies accuse investors of being greedy and only wanting to enhance their profits.

“I don’t think the general public understands that if you live in a homeowners association and follow the rules, you should be concerned about this,” Stone said. “It will hurt you if investors have their way.”

Ok… let’s think this through a little bit. The previous owner of the property was not paying their HOA dues. The house sells to a new owner who can afford the upkeep on the home and they get to pay all of the past dues AND all of the collection fees that were tacked on?

In my case scenario previously mentioned above our estimate of past HOA dues that were not paid was around $4,000. I have no idea the exact details / fines associated with that particular property because I was not representing the seller in that attempted transaction. My real estate investor that I was representing would have been fine with paying another $4,000 in past HOA dues to obtain the property …. however…. $13,000+?

Not a chance…

Example of Collection Fees Tacked On

Below are excerpts of a letter sent to a homeowner that I was representing in a Las Vegas short sale. The seller had lost their job and was in such dire straights he could not even afford to keep his utilities on and had to move in with his parents.

Amount due at the time of the letter including Late Fees = $1,113.00.

A futher breakdown of the fees from the same letter:

Some simple math here:

$1,113.00 minus $665.00 in late fees, collection fees and interest = $448.00 in past HOA dues.

$665.00 divided by $1,113.00 = 60% of the bill in fees that HAD to be paid by somebody to transfer ownership to the buyers to make the short sale happen and keep the home from going to foreclosure. Obviously… we all should know by now that a Las Vegas Home that goes through the foreclosure process and the time it takes before a new owner can move in is not in the Best Interest of the Community.

In an e-mail that the seller sent to the Homeowners Association explaining the situation and how he did not know the collection fees were going to get racked up, that the home was in escrow and a new buyer would be taking over, here is the response he received:

Once assessments are 60 days past due and over $200 in arrears, we send those files to collections.  We do not waive fees from the collection agency as the rest of the community then is paying for someone else’s delinquency. Nor do we ever waive assessments due as they also become a burden spread on the backs of the rest of the community.

As far as notices, they go out regularly.  If you did not change your address with the management company in writing after you moved, there was no way for them to know where to send notices.  You had a coupon book and could have kept paying your assessments as we don’t regularly bill.
I’m sorry there is nothing which I can do or offer up as help as we cannot put the burden of all the collection fees which homeowners accumulate on the rest of the community.  Perhaps ya’ll could split them or the real estate agent would be willing to help.

–End of Message

This is just one example of several on the mentality when it comes to distressed Las Vegas homeowners wishing to move on and avoiding foreclosure.  I only post this example because the homeowner that this was done to Requested that I post it and to share the added stress he had to go through instead of “putting the burden of all the collection fees on the rest of the community”.  (Over 500 Homeowners in this particular community.)

Luckily, this ended up with a happy ending since I was able to convince the bank to pay the fees so title could be transferred to the happy new owners.

In absolutely ZERO way am I suggesting that past HOA dues are not paid back to the association and homeowners of the community with a transfer of ownership from a distressed Las Vegas Homeowner and I don’t know any Las Vegas real estate investors that do not feel the same way.

The past HOA dues owed are not just going to be wiped away and disappear with the rest of the homeowners in the community being stuck paying them and that’s not even the issue.

In my $13,000 plus example from my investor situation above, he was planning on spending over $40,000 in rehabbing the property which included new exterior paint and new landscaping for the front yard. It certainly would have been a huge improvement to that street in that particular community.

I think it’s pretty safe to say that the improvements that were planned for the property if the short sale would have gone through would have been much better “in the interest of the community” then paying all of the collection fees.

Instead… the property sat blighted for another 7 months before being sold to a new homeowner.

Regardless… until a common sense solution is created, do whatever it takes to pay those HOA dues to avoid making a bad situation even worse.

And please do not think that gouging Las Vegas Real Estate investors looking to purchase and improve homes in the community is the solution.

If you want to see pictures of Las Vegas homes that were broken in to, vandalized and practically destroyed after being foreclosed on, well… I’ve got those to.

And I can tell you, it certainly does not add value that is in the best interest of all the homeowners in the community when the property eventually sells for far less then market value.

Paul Francis, CRS
Prudential Americana Group – REALTORS
Las Vegas Short Sales
702.592.3058

to predict until Distressed Homes are gone.

Will Las Vegas home values go up, will they go down? Make sure you read my latest report on Las Vegas valley home values in response to a recently released study that predicts Nevada Home Values to fall another 12% before stabilizing.

The first time homebuyers tax credit is over and has been for several months now. Las Vegas real estate inventory available for sale is going back up and the total amount of inventory currently available on the Las Vegas MLS for Las Vegas, North Las Vegas and Henderson (aka the Las Vegas Valley) is:

• 15,939 Single Family Homes, Condos, Townhomes and Manufactured Homes
• 519 High Rise Condominiums. (Condos in buildings over 4 stories high.)

Unfortunately, the timing of the first time homebuyers tax credit was all completely wrong as distressed homes or homeowners owing far more on their mortgage then the home is worth were going through the process of foreclosure. In other words, Las Vegas home values were still in the correction process and working through the system while a program was put in place to entice buyers to catch a thrown knife.

I know plenty of potential home buyers that wanted to buy when the first time homebuyers tax credit was available, but lack of quality inventory of well priced homes prevented them from buying so they gave up after going through the frustration of competing with other buyers and multiple bids on the decent Las Vegas homes that were available.

Sure… plenty of Las Vegas homes were purchased during the available time frame for the $8,000 tax credit, but FAR more could have been purchased if the distressed inventory was allowed to be worked through and put on the market.

Now the tax credit is over (officially over on 04/30/2010 to have a contract of sale)… and the Bank Owned Inventory for Las Vegas available for sale is going back up.

Bank Owned Homes Available for Sale

Notice that in April there were 1,281 Bank owned Single Family Homes, Condos, Townhomes and Manufactured homes available for sale on the Las Vegas MLS.

Today.. there are 3,480 Single Family Homes, Condominiums, Townhomes and Manufactured Homes owned by the bank currently available for sale on the Las Vegas MLS or a 272% increase.

I’m not even going to mention all of the Las Vegas short sales currently available for sale. (Ok.. over 7,700…)

Here is a breakdown of the REO (Real Estate Owned aka Bank Owned Real Estate) currently available for sale in the Las Vegas Multiple Listing Service just covering the Las Vegas Valley. (Las Vegas, Henderson and North Las Vegas.)

• 2,689 – Single Family Homes
• 506 – Condominiums in buildings less then 5 stories high.
• 264 – Townhomes
• 56 – High Rise Condominiums (Buildings 5 stories plus.)
• 21 – Manufactured Homes
• 16 – Multi-Family Properties. (2 units or more.)

Total = 3,552 Bank Owned Properties for Sale on the Las Vegas Multiple Listing Service (MLS).

Obviously when banks do finally put a property up for sale after taking it back, they want it sold. When a homeowner is selling their home and owes far more then what it’s worth (Short Sale)… they want out of that overpriced mortgage and for the most part, will do what it takes to get it sold which often means reducing the price.

Foreclosure moratoriums only delay the inevitable. Eventually a distressed home is going to hit the market and it’s going to get sold one way or another.

So… when is it all going to end to return to a Normal

Real Estate Market in Las Vegas?

Impossible to determine as long as there are a large amount of Las Vegas homeowners out there with mortgages higher then what their Las Vegas homes are worth which is currently estimated at around 80%.

The good news is that the percentage of Las Vegas homes with no mortgage is also growing. Over 40% of the homes purchased in the last year and reported on the Las Vegas MLS have been with CASH.

It’s also fair to say that with home values so low and mortgage interest rates so low, that the homes purchased in the last year where a mortgage was taken out, that the monthly mortgage payment is far lower then the current rents in the immediate area. Sure.. there are probably plenty of them who have already lost equity and now owe more then the home is worth, but the mortgage payment is still probably lower then if they were going to go out and rent the same home down the street.

In other words, the 80% of Las Vegas homeowners owing more then their home is worth is not nearly as important as the number of Las Vegans with a mortgage payment FAR higher then comparable rents.

That’s the REAL number we need to know and I have yet to see any credible reports that have come up with some realistic number.

Are Foreclosure Reports Any Big Deal?

For Las Vegas real estate at this point of time I have to say no. Great for headlines from the national media and all of the foreclosure report services out there trying to make a buck with foreclosure searches (Search Las Vegas Bank Owned Homes for Free right here) but pretty much irrelevant for the Las Vegas home buyer and seller.  The correction is going to take place no matter what program is put in place. Maybe the program will delay the correction, but the correction is going to take place as evidenced by what has and is happening with Las Vegas real estate after all of the programs.

Sure… home values may go down in Las Vegas another 12% or even more but at this stage of the game that Las Vegas is in, does it really mean anything? Read Las Vegas Home Values still going down.. big deal and let me know what you think.

I’d be more worried about the numerous real estate markets out there across the country that have not had a chance to even reach half way through the correction process and it’s still cheaper to rent then buy.

In the new economy… it’s all about the cash flow.

Paul Francis, CRS
Prudential Americana Group, REALTORS
Las Vegas Home Values
702.592.3058

As mentioned in my last article about GMAC, JPMorgan Chase and Bank of America concerning the Foreclosure Mills and Robo-Signers halting foreclosure sales in 23 judicial foreclosure sales and the potential of all Foreclosure sales being temporarily halted, Bank of America has now announced that Foreclosure sales in ALL 50 states are now suspended…

B of A Halts All Foreclosures – WSJ – 10/08/2010 -By Dan Fitzpatrick And Damina Paletta

Bank of America Corp. said it is placing a moratorium on all foreclosure sales across the U.S., amid political pressure on U.S. banks to examine foreclosure-documentation problems.

The nation’s largest bank by assets is the first financial institution to stop all foreclosure sales amid revelations that the banking industry had used “robo signers,” people who sign hundreds of documents a day without reviewing their contents, when foreclosing on homes. Bank of America, J.P. Morgan Chase & Co. and Ally Financial Inc. (parent of GMAC Mortgage) last week postponed foreclosures in 23 states where a court’s approval is required to foreclosure on a home.

Read Full Story Here

Foreclosure Process will Continue

In the article notice that it states that foreclosure proceedings will continue which basically means that while Bank of America will not take possession of homes from homeowners not paying their mortgage, the actual foreclosure process will continue until it is sale time.

Expect shadow inventory to grow even larger. A recent shadow inventory report by Standard & Poor’s estimated that the current Shadow Inventory of homes is already going to take approximately 41 months to clear out with some metro areas such as New York taking as long as 103 months. (The report was made before all of the foreclosure sales were halted.) As long as all of this Shadow Inventory is hanging over the real estate market, any truly sustainable real estate recovery is out of the question.

What is Shadow Inventory?

Depending on who you ask, Shadow Inventory is real estate owned or in the process of being owned by Banks (such as homes in foreclosure) that is not currently available for sale but eventually will be. In the grand equation of  Supply + Demand = Price, Shadow Inventory is that hard to calculate Supply variable. It’s an extremely difficult number to pinpoint but let’s put it this way… if all of the shadow inventory was put up for sale at one time, expect home values to drop like a rock due to supply increasing dramatically.

Pay attention to your neighborhood and how many homes are sitting empty. You know they are bank owned or the homes are in foreclosure yet they are not up for sale. This is Shadow Inventory.

It’s tough to say how long the foreclosure sale moratorium will take place as the Foreclosure Mills get their act together  but keep in mind this has nothing to do with taking back homes from people who are paying their mortgage.  Banks are overwhelmed with foreclosures as it is…. they really do not want any more homes worth far less then the amount owed on them.

All this will probably do is delay foreclosure sales for a couple of months, build up more shadow inventory and extend the pain of the correction even longer.

Paul Francis, CRS
Prudential Americana Group – REALTORS
Las Vegas Real Estate
702.592.3058

First it was GMAC (owned by Ally Financial), then it was JPMorgan Chase & Co and today it is Bank of America announcing the suspension of foreclosures due to documentation problems during the judicial foreclosure process.

From the Wall Street Journal:

Bank of America Suspends Foreclosures – WSJ – Robbie Whelan – 10/01/2010

Bank of America Corp. has suspended all foreclosure proceedings in 23 states starting Friday, the latest bank to stall the process amid documentation problems across the country.

The Charlotte, N.C., lender doesn’t know how many foreclosures this move could affect, a spokesman said. The bank wouldn’t say whether it suspected any errors in its documents.

“The assessment is not yet complete,” the spokesman said via email.

Read Full Story Here

Note… the 23 States are not listed but they are states where foreclosures are handled through the courts, AKA Judicial States. Nevada is primarily a Non-Judicial state. (See Difference at the end of this article.)

Two “Robo Signers” admitted in court of signing off authorizations to foreclose without reviewing loan documents.  One admitted to 10,000 a month and the other admitted to signing off on around 18,000 in one month.

I think it’s safe to say that there is no chance any one person could honestly handle more then 500 loan document reviews a month without cutting corners. Signing Affidavits stating that they were when you did over 10,000 in one month is pretty ludicrous in my opinion and I’m surprised it took this long for somebody to catch on.

Analysts weigh in on GMAC’s Foreclosure Snafu – DSNEWS.com – Carrie Bay 09/28/10

Last week, GMAC Mortgage’s parent company, Ally Financial, called for a halt on residential foreclosures and a suspension of REO sales in 23 judicial states that may have been impacted by what the company said was a glitch in its internal procedures.

Read Full Story Here

Pay particular attention to the Analysts predictions concerning the slow down of the foreclosure process, higher costs involved and REO inventory being delayed from hitting the market. Certainly a VERY good indication that working on beefing up those short sale departments and avoiding foreclosures in the first place is the way to go.

On the flip side, look for tens if not hundreds of thousands of homeowners living in homes for free for a significantly longer amount of time, delaying the inevitable because of a Snafu. An uncontested foreclosure in a judicial state such as Illinois can easily take over 7 months during normal times and these certainly are not normal times.

Once again… this is in Judicial Foreclosure States but non-judicial foreclosure states may take notice.

JPMorgan Suspending Foreclosures – The New York Times – David Streitfeld – 09/29/10

In a sign that the entire foreclosure process is coming under pressure, a second major mortgage lender said that it was suspending court cases against defaulting homeowners so it could review its legal procedures.

Read the Full Story Here

Note the comment from the Florida Real Estate agent at the end of the article who is not paying the mortgage on their rental property.

Now that the lender has withdrawn the affidavit in her case, she was determined to press every advantage.

“I think they should have to answer for this,” she said.

Interesting…

Once again… I want to reiterate that so far these suspensions are in what we call Judicial States where foreclosures are handled in a court of law.

Judicial foreclosures are processed through the courts, beginning with the lender filing a complaint and recording a notice of Lis Pendens. The complaint will state what the debt is, and why the default should allow the lender to foreclose and take the property given as security for the loan.

Non Judicial Foreclosures -

Non-judicial foreclosures are processed without court intervention, with the requirements for the foreclosure established by state statutes. When a loan default occurs, the homeowner will be mailed a default letter, and in many states, a Notice of Default will be recorded at approximately the same time. If the homeowner does not cure the default, a Notice of Sale will be mailed to the homeowner, posted in public places, recorded at the county recorder’s office, and published in area legal publications. After the legally required time period has expired, a public auction will be held, with the highest bidder becoming the owner of the property, subject to their receipt and recordation of the deed. Auctions of non-judicial foreclosures will generally require cash, or cash equivalent either at the sale, or very shortly thereafter.

NEVADA is PRIMARILY a Non Judicial Foreclosure State so Please do not Read this Article and referenced articles thinking that because your Nevada home loan is serviced by GMAC, JPMorganChase or Bank of America that you have nothing to worry about right now and it’s all going to go away like a bad dream.

If you are a Las Vegas area homeowner and have stopped making your mortgage payments and confused on what to do, contact me to see if a Las Vegas short sale is the right alternative for you.

Paul Francis, CRS
Prudential Americana Group – REALTORS
Las Vegas Short Sales
702.592.3058

Good news for Lake Las Vegas as a new hotel operator has been selected to open the doors of the hotel once operated by the Ritz Carlton.

Company Plans to Rebrand closed down Ritz-Carlton at Lake Las Vegas – Las Vegas Sun – Steve Green – 09.21.10

Read Full Story Here

Good news and probably a good fit for Lake Las Vegas.  According to the CEO of Dolce Hotel and Resorts, 60% of their business is corporate meetings so they obviously can pull on their contacts to fill rooms.

Paul Francis, CRS
Prudential Americana Group, REALTORS
Lake Las Vegas Real Estate
702.592.3058

An interesting post well worth reading over at Foreclosuretruth.com.  Check this out from “Want to Know when Prices will rise? Ask the Government!

The second thing I noticed about this chart was the dramatic price increase in the 1940’s, and the home price bubbles in the 20’s, 30’s, 70’s and 80’s. While much research has been done on these price increases and bubbles, I began to suspect one simple cause that in hindsight is blatantly obvious… and has nothing to do with irrational behavior on the part of buyers as some have recently concluded.

A brief summary of the Government Programs that were run and you can match up home values going up right after wards with the Case-Shiller 100 Chart that Sean Provides.

That’s right. Every single significant increase in home prices in the last 100 years was immediately preceded by government intervention. The evidence is irrefutable. Every time the government works to make housing more affordable, prices rise.

I found a recently updated one over at Ritholtz.com that was done by a Steve Barry to reflect up to July of 2010 that is below. (Updating the Case Shiller 100 Chart 07/28/2010)

(Click Here on for a Full View)

You can notice the tick up at the end reflecting the first time homebuyers tax credit, loan modifications and everything else to keep home values from returning to where they should be if it was not for the lax lending standards and no money down loans of the early 2000′s.

Here is an article from February of 2009 from BusinessInsider.com that discusses delaying the inevitable.

The Housing Chart That’s Worth 1000 Words

From RealtyCheck September 2010

Bank Repossession of Homes Sets Record in August of 2010

The nation’s banks repossessed a record number of homes in August, according to industry sources. RealtyTrac, an online foreclosure sale site, will release its monthly numbers on Thursday, but sources there confirm the number of repossessions will come in just shy of 100,000 for the month.

That is the highest since the site began tracking in 2005. July’s repossession number was the second highest on record. The last highest was 93,777 in May of 2010.

So here we are today after Billions of Dollars of U.S. Taxpayer Dollars were spent… looking at the chart above and the uptick created from the First Time Home Buyers Tax Credit, did the Government just create another little bubble?

If the latest numbers from Realtytrac are correct in the record number of bank repossessions that just took place, it looks like it…

By the way… here is a chart from Foreclosureradar.com showing the number of Bank Repossessions in Clark County, Nevada.

32003 – Foreclosure Outcomes

It’s no new news that Clark County, Nevada has had the highest number of Bank Repossessions per capita in the country for quite some time and home values have already been decimated… resulting in a 16% decrease compared to August of 2009.

Primarily due to the fact that prices in Las Vegas were already in the process of correcting long before HAMP, First Time Home buyer tax credits and any other program you can think of….

Are Home Values in the Rest of the Country going to catch up to Las Vegas?

Paul Francis, CRS
Prudential Americana Group – REALTORS
Las Vegas Real Estate
702.592.3058