[dmilll]

Originally Posted by Daddys///M3

Although I agree with you that the banks holding foreclosures on their books and leaking them slowly to the tune of 25,000 is quite ridiculous (one only has to look at bank capitalization requirements to see how massively unprofitable that would be), and I hope you are correct in your call of 2004 pricing within 5 years, I simply don't see anything in the broader economic picture (locally or nationally) that would indicate that this is the case. For one thing, although rates are still relatively low last Tuesday-Wednesday was a sign of things to come in fixed incomes, in my opinion. Between Moody's saying (incorrectly of course at least for now) that the nation was on the verge of losing it's credit rating and China moving portions of it's US debt holdings to shorter term fixed incomes (amidst other concerns as it always is lately) the fixed income markets took a massive nose dive. The benchmark mortgage bond at the time, the FNMA 4.0 30 year, lost over 270 bps from it's high of the day in less than 10 hours. I saw 5 reprices for the worse on Wednesday, my lock desk was open all of about 3 hours. I saw rates go from 4.875% for my government borrowers to 5.375% within a day. Things don't look good for the bond market, and QE is only delaying the inevitable in my opinion. You don't get out of a hole by digging it deeper.

I guess only time will tell how the REO issue will actually unfold in the valley. I think a great many homeowners would like to see a return to 2004 prices but I agree with your take about the bond market and the recent fluctuations being a sign of (potentially) negative things to come.

As an example, look at the CBO's March 2009 take on the budget and the economy.

Congressional Budget Office - A Preliminary Analysis of the President's Budget and an Update of CBO's Budget and Economic Outlook
"The cumulative deficit from 2010 to 2019 under the President’s proposals would total $9.3 trillion, compared with a cumulative deficit of $4.4 trillion projected under the current-law assumptions embodied in CBO’s baseline. Debt held by the public would rise, from 41 percent of GDP in 2008 to 57 percent in 2009 and then to 82 percent of GDP by 2019"

In short, we are on the same path as the UK where their debt is fast approaching 100% of GDP and their outlook was lowered to negative. CBO projects TRILLION dollar deficits in the US for at least the next ten years. Sooner or later the bill will come due for all this spending and how the government handles this will be key. If they choose to monetize their way out of this as indicated by the feds commitment to purchase bonds, borrowing costs could rise to a level not seen in a very long time...

[whowhatwhere]

Originally Posted by olecapt

The olecapt walks out on the plank..whips out his saw and begins cutting between he and the boat...

It appears the end is upon us. We are in the valley. We prophesy that the resale prices of Single family residences in Las Vegas will go up in May over April.

For those more conservative than Olecapt...it could be a seasonal variation.

But Olecapt thinks not. There is more than one variable in play and a couple say we are turning the corner.

Now the mythical 22,000 bank owned could appear in the next week. Or interest rates could pop up a point...or City Center could be destroyed in an earthquake (or imploded by a consortium of bankers)...but short of a catastrophe it appears the numbers suggest an end of the downward trend.

Now remember no one...including olecapt...should announce such a thing without months of data...but by then all would have noticed.

So olecapt stands on the end of the plank and saws away...

Won't it be fun to arguue about how long until we get back to 2004?

We must have different numbers.

Here are mine:

According to MLS as of about 10 minute ago there are 21175 SFR homes on the market. Of those there are 7383 REO properties and 8598 short sale listings. That doesn't include condos or townhomes which brings the totals to 26,768 properties of which there are 9249 REO properties and 10890 short sale listings.

Here's where it gets fun :

Between Las Vegas, North Las Vegas and Henderson there are 34,123 properties that have an NOD filed. There are 14,202 properties up for Trustees auction and there are 24,213 REO properties. That gives a total of 72,538 properties that are 90 days past due or worse. These numbers don't include that properties that have not had an NOD filed because the banks are too busy. And yes, there are THOUSANDS of them.

If there are 26,768 properties on MLS but 72,538 distressed properties where is this bottom that you speak of.



We are not even close to the bottom. Not in terms of pricing, and not in terms of time.

[airics]

don't you think some of these people are going 90 days on purpose to get the loan mods?

[gulfer]

Good comments OleCapt and Daddy and a great question airics. Maybe I'm being pesimistic about having to pay this money back and maybe more frustrated then anything else then all of this money bailing out banks, companies, etc... I just think that the average person isn't going to be able to keep paying as interest rates rise. When that happens, who knows...but when things start to pick up in the economy, so much for 'cheap' interest rates.

[whowhatwhere]

Originally Posted by airics

don't you think some of these people are going 90 days on purpose to get the loan mods?

Of course they are. But the problem is that reducing someone's interest rate isn't going to help them when their home is worth half of what they paid for it. Most people who are that far in the hole will just walk away from the house. And that's exactly what they're doing.

If someone paid $300,000 for their house and they can buy the one across they street for $130,000 why would they stay? I wouldn't and neither would most intelligent people. The problem isn't the interest rate. It's the principle, and the banks haven't shown that they're willing to adjust the principle very much if at all. Loan modification will only work in places where the value has had a minimal drop. Clark County doesn't qualify for that standard.

[airics]

however, i believe (and i may be wrong) that buying the house across the street and walking away from the one you are in now is fraud.

[whowhatwhere]

You are very correct, and I would never advise someone to do such. But renting it from a buyer who got it as an investment property isn't fraud.

[airics]

true.. but i would never rent..but thats me.. but someday, hopefully in my lifetime, the economy will come back.. lol

[Daddys///M3]

Originally Posted by airics

don't you think some of these people are going 90 days on purpose to get the loan mods?

Absolutely. From what I've been hearing the banks won't even talk to you about a mod or even a short sale without you being 90 days late. That being said, although I haven't seen them lately as of a few months ago the re-default stats on modded loans were somewhere around 60%. That's not a very promising stat.

Originally Posted by gulfer

Good comments OleCapt and Daddy and a great question airics. Maybe I'm being pesimistic about having to pay this money back and maybe more frustrated then anything else then all of this money bailing out banks, companies, etc... I just think that the average person isn't going to be able to keep paying as interest rates rise. When that happens, who knows...but when things start to pick up in the economy, so much for 'cheap' interest rates.

I agree 100%. That is my greatest concern currently is the amount of debt we as a country are getting ourselves into. Take a look at the idea behind quantative easing. It's basically akin to taking a cash advance to pay off an existing credit card debt, and I'm sure that there are quite a few people in this day and age that can tell you how successful that strategy is. On your point about rates, they continue to worsen. FHA/VA rates are effectively 0.75% higher than they were 2 weeks ago. Not a good way to get the housing market moving, and with many analysts and government officials saying that we will be led out of this recession by the housing market I think that the rising rates and potential negativity because of that speaks volumes.

That being said, 5.5% is still a very good rate and in many cases it is still less expensive to own a home than to rent one in Las Vegas right now. As masochistic as it may sound, I am actually hoping for more REO inventory. They are easy to close, the lenders will work with the buyers, and being that the majors are trying like hell to capture market share and I am of course competing directly with them I need to make my money on volume. I do believe that we will see steady and possibly slightly increased sales volume through the end of the year, and possibly into 2010 depending on what the government has planned, as long as we can keep enough inventory on the books.

Originally Posted by whowhatwhere

Of course they are. But the problem is that reducing someone's interest rate isn't going to help them when their home is worth half of what they paid for it. Most people who are that far in the hole will just walk away from the house. And that's exactly what they're doing.

If someone paid $300,000 for their house and they can buy the one across they street for $130,000 why would they stay? I wouldn't and neither would most intelligent people. The problem isn't the interest rate. It's the principle, and the banks haven't shown that they're willing to adjust the principle very much if at all. Loan modification will only work in places where the value has had a minimal drop. Clark County doesn't qualify for that standard.

Although I agree with you to an extent, the problem with your last paragraph is that financing the home across the street is going to be damn near impossible. There are guidelines in place to prevent that sort of thing. For example, if you were to convert your current primary into a rental (or if you said you were anyway) not only would you have to meet the new equity requirements set forth by FNMA, FHLMC, and FHA/HUD to include rental income (or qualify on both payments), but the home absolutely must be an obvious upgrade. Closer to work, substantially larger, going from a two story to a single story for health reasons, etc. Moving across the street to buy the same home (even if you could qualify on both payments) for half of what your current home is worth is an immediate buy and bail red flag and I can guarantee that the file will be denied in underwriting. That is unless you have a competent LO who will kill it before an underwriter even sees it.

Also, there are people that are simply trying to save their homes that are applying for these loan mods. Many people are in the midst of financial hardship, and many times a loan mod will help buy time. However as I mentioned before, the re-default rate on modded loans is staggering.

That being said, you speak of the rational foreclosure and we are definitely seeing it more (although loss of income, illness or death, and divorce are still the major causes of foreclosure). Unfortunately, every program that has been put in place by the government to stem the tide of foreclosures has been an utter failure. I am of the opinion that they need to let it crash hard so that we can begin the rebuilding ASAP as opposed to trying to soften the blow and in turn simply extending the pain.

[olecapt]

Originally Posted by whowhatwhere

We must have different numbers.

Here are mine:

According to MLS as of about 10 minute ago there are 21175 SFR homes on the market. Of those there are 7383 REO properties and 8598 short sale listings. That doesn't include condos or townhomes which brings the totals to 26,768 properties of which there are 9249 REO properties and 10890 short sale listings.

Here's where it gets fun :

Between Las Vegas, North Las Vegas and Henderson there are 34,123 properties that have an NOD filed. There are 14,202 properties up for Trustees auction and there are 24,213 REO properties. That gives a total of 72,538 properties that are 90 days past due or worse. These numbers don't include that properties that have not had an NOD filed because the banks are too busy. And yes, there are THOUSANDS of them.

If there are 26,768 properties on MLS but 72,538 distressed properties where is this bottom that you speak of.



We are not even close to the bottom. Not in terms of pricing, and not in terms of time.

What do you mean by on the market. The pending category is off the market and really so is the contingent category.

Perhaps a quicky so people understand what we are talking about.

At the moment there are 28293 listing on the MLS that have not been sold.

This includes everything and in all statuses that have not yet been sold.

Of these homes 21964 are Single Family Residents.

Of these residences. 777 are in T status which is temporarily off the market and not showable.

And 3370 are in P status. That means an offer has been accepted and the close of escrow is pending. They are not available for showing.

There are 6954 in C status. These are sales where an offer has been accepted but certain contingencies have not been met. Some of these contingencies are things like inspections not yet completed. But more significantly are contingencies like financing or short sale approval. These may well never occur. So a C status is someplace between on the market and sold. Most agents don't show C status and it is often not possible to do so though it is allowed by the MLS Rules.

I treat a C status as unavailable...which is generally the case. I make an exception occassionallly for perfect fit properties to the clients needs. Than I will try to show it and to make a back up offer. But it is rare to do it and rarer yet to have a good outcome.

That leaves the EA and ER categories which are avaiable to show. There are at the moment 10,868 homes in these classifications. The difference between these two categories is a technical one mostly of interest to the agent. In general the common EA usage is builders or HUD. It basically say that the seller reserves the right to sell it themselves and not pay a commission.

But we are not done yet. The 10,868 homes can further be broken down into REOs, Shorts and non-distressed.

There are presently 2404 REOs in the EA and ER category. These are the ones that are available to the buyer to see and buy. This is also the number tracked on my blog page on REO Sales.

Shorts constitute 4454 Homes. These are the ones where the bank must agree to the sales price as it is less than is owed on the mortgage. They still have a very bad batting average selling at less than 10% of the homes sold.

Finally we have the non-distressed or normal category...There are at the moment 3963 of these.

So far this month we have sold 342 SFRs. REO constitute 260 or 76%. Shorts are 30 or 8.7% and normal homes are 53 or 15.5%. ( And I know the numbers don't quite add to 100%. That is a flaw in the MLS dealing with the fact that some categories do not requires those not no to be yes.)

The most important thing is that the REO percentage and the REO inventory both continue downward. And the REO price appears to have flattened. We have been at about the same price for the last three weeks.

Approachd in inventory terms we are now at less than a month for REOs but at about a year for normal homes and two years for Shorts.

As to NODs and such I think that area is simply not understood. Trustee salies have this odd behavior of showing very large numbers of sales called for and much fewer performed. In a month with 12000 or so Trustee sales sheduled we end up with 1500 occuring.

The county data base continues to tell the tale. Bank owned homes are down by over a thousand this year. The 22,00 or 25,000 is apparently "empereor's clothes" type number. Everybody hears them but nobody knows where they come from. They appear to be quite fictious.