The foreclosure market is our reality and we have to deal with it. We need to educate the home owners about their options before it is too late and they too become part of the foreclosure statistics. At least half of the homeowners who are headed for trouble have not talked to anyone about their future financial danger.
Fault for the increased number of foreclosures? Who is to blame? Is it one or many? Wall street is at fault- say the lenders and many estude real estate leaders like Dave Liniger, Chairman of the Board of RE/MAX International. Lenders are at fault - say the buyers who ask for no down payment and adjustable rates. Appraisers are at fault - say the Sellers who ask for their homes to valued higher. Investors are at fault – say the REALTORs who may have promised investors unrealistic future appreciation. And the media is all over the board watching the darts fly.
A buying frenzy occured in 2004 and 2005 and one segment fed off of another segment and no one thought the food source would suddenly stop. That food source was the home buyers ability to make their rising adjustable mortgage payments and the investors who could not rent their homes because the renters were buying homes for payments lower than rent payments. Also, if the investor did find renters they had a negative cashflow. The supply of homes that got dumped on the market were too high priced. Thus the foreclsures began.
At first the govenment stood by - after all it is an election year. Then they did lower the interest rates and they did provide funding for counciling. Now there is talk of the govenment helping the first time home buyers.
In the meantime, the investors who hung in there are now renting to the foreclosed and the bankrupt home owners who need a place to live. That is good for the investors. And good for the banks who hold those mortgages and are getting paid. And good for the neighborhoods with empty uncared for homes that are now at least getting someone to maintain the homes.
The foreclosed home owner is experiencing a major financial crisis for now and the foreseeable future. The foreclosed home owners make up about 2% of all home owners. In Las Vegas 1 out of every 137 homeowners are in some stage of foreclosure. The Mortgage Bankers Association reports 98% of all home mortgages in the USA are not in foreclosure. And, sub-prime loans represent at least 14% of the mortgages. These are just facts that academically define the current situation and put it into perspective. The sky is not falling.
These foreclosures were partially responsible for the increased inventory here in Las Vegas. In 2007 we had over 27,000 homes for sale. The other part of the inventory story was the high prices that the sellers were asking. The last quarter of 2007 the banks lowered their prices so the median buyer in Las Vegas could afford to buy a home. In December, 42% of the homes that sold were bank owned homes. Twelve weeks into 2008, our inventory has dropped to below 22,000 homes for sale. The banks set the pricing to allow buyers to buy. The sellers are following suit and lowering their prices. The median price of a home in Las Vegas is now under $255,000. The banks are continuing to drop prices to sell their homes. The Las Vegas home buyer is coming back into the market. There are over 4000 pending sales right now in the Multiple Listing Service. The inventory has dropped from a 25 month supply to a 16 month supply. It appears that Las Vegas is headed for a recovery. The only way this recovery can sustain itself is for the median home price and rental payments to stay at an affordable price for the major industry employees. 80% of the Las Vegas working population work for the casino industry.
