Posts Tagged ‘Las Vegas’

Foreclosures Appear to Be Stabilizing

Monday, August 29th, 2011

Foreclosure filings fell a dramatic 35 percent in July to the lowest level in nearly four years as lenders and state and federal agencies ramped up their efforts to keep delinquent borrowers in their homes, according to RealtyTrac Inc.  A total of 212,764 properties received default, auction or repossession notices, the lowest number in 44 months.  Filings declined on a year- over-year basis for the 10th consecutive month, and were down four percent when compared with June.  One in every 611 households across the country received a notice.  “The downward trend in foreclosure activity has now taken on a life of its own,” RealtyTrac Chief Executive Officer James J. Saccacio said.  “Unfortunately, the fall-off in foreclosures is not based on a robust recovery in the housing market but on short-term interventions and delays that will extend the current housing market woes into 2012 and beyond.  It appears that processing delays, combined with the smorgasbord of national and state-level foreclosure prevention efforts, may be allowing more distressed homeowners to stave off foreclosure.” 

Nevada leads the nation with the highest foreclosure rate of any state, one filing for every 115 homes.  California, with one foreclosure for every 239 homes came in second, while Arizona, with one in every 273 homes, was third.  Las Vegas continued to record the nation’s highest foreclosure rate, with one in every 99 homes getting a foreclosure filing in July. 

Foreclosure auctions, the final step in the agonizing foreclosure process were also scheduled on five percent fewer properties in July.  The month’s auction total hit a three-year low and was nearly half (46 percent) below the March, 2010, peak.  An estimated four million vacant homes not yet accounted for by lenders constitute an immense inventory of residential properties, approximately 2.2-million of which are in default and have not yet been formally foreclosed known as the “shadow inventory” weigh down the marketplace. 

The Obama administration is proactively seeking ways to dispose of foreclosed homes that are under government control.  The goal is to “bring stability and liquidity” to the housing market, Edward J. DeMarco, acting director of the Federal Housing Finance Agency (FHFA), said.  The FHFA regulates Fannie Mae and Freddie Mac, which guarantee approximately 90 percent of American mortgages.  President Obama has proposed a program to encourage the rental of foreclosed homes owned by the Federal Housing Administration, Fannie Mae, and Freddie Mac.  Banks could adopt similar programs and offer homes at steep discounts to get residential real estate off their books.  Financial institutions typically get lucrative write-offs from these and so might prefer to rent some properties.  Other federal attempts to prop up the housing market have not been successful to date.  The Making Home Affordable Program operation was launched in March of 2009 with the main component the Home Affordable Modification Program.  This was created to cut mortgage payments for families who couldn’t afford them, but wanted to keep their houses.  A Congressional Oversight Panel report said the programs had failed and fell far short of its goal to modify mortgages for three million to four million homes.  The new Obama plan to rent foreclosed homes has the potential to positively impact home prices.

Writing on MSNBC, John W. Schoen says that “A sharp slowdown in the pace of home foreclosures may help ease the financial burden on bankers by helping them unload a glut of repossessed homes more slowly and delay booking losses from the sale of distressed properties.  But it will do little to help millions of Americans families at risk of being tossed from their homes in the next few years.  The slowdown follows a wave of legal challenges by homeowners that has all but shut down the machinery of bank repossession in some states.  Some homeowners are disputing the widespread practice of ‘robo-signing’, in which lenders process batches of foreclosure fillings with little or no formal review.  Other homeowners have successfully halted repossessions by questioning shoddy paperwork or broken paper trails that don’t establish clear title to a property.  The slowdown has left millions of American households in legal limbo, prolonged the housing market’s four-year recession and delayed hopes for a broader economic recovery.” 

“The process has more or less ground to a halt in a lot of states that do foreclosures through the court system,” said Rick Sharga, a senior vice president at RealtyTrac.

Foreclosed Homes Total a Three-Year Supply

Tuesday, June 14th, 2011

The current national inventory of foreclosed homes represents a three-year supply, according to RealtyTrac.  Not surprisingly, that is depressing home prices.  “This is very bad for the economy,” said Rick Sharga, a RealtyTrac spokesman.

In Las Vegas, the foreclosure situation is so dire that more than half of all homes sold in Nevada are foreclosures.  In California and Arizona, 45 percent of sales are foreclosures; that totals 28 percent of all existing home sales during the 1st quarter of 2011.

Additionally, the nation’s stock of foreclosed homes are selling at deep discounts, particularly REOS, which are bank-owned homes.  The typical REO sold for about 35 percent less than comparable properties, according to RealtyTrac.  In some areas, the discounts were ever steeper: In New York, the discount for REOs was 53 percent during the 1st quarter and almost 50 percent in Illinois, Ohio, and Wisconsin.

“Short sales,” homes where the selling price is less than what is owed by the borrowers, are also dragging down the market.  These sell for an average nine percent discount.  When you consider both REOs and short sales, Ohio had the biggest discount of any state, at 41 percent.

During the 1st quarter, there were 158,000 sales involving distressed properties nationally, less than half the nearly 350,000 during the same period of 2009.  With the slower pace of sales, it will take three years to sell off the inventory of 1.9 million distressed properties, according to Sharga.  “Even if you look at REOs alone, it will take 24 months to clear them and that’s without any new foreclosures at all coming into the system,” he said.

RealtyTrac found that the average sales price of properties in some stage of foreclosure, scheduled for auction or bank-owned — was $168,321, down 1.89 percent from the 4th quarter of 2010.

A total of 158,434 bank-owned homes and those in some stage of foreclosure were purchased during the 1st quarter, a 16 percent decline from the 4th quarter of last year and down 36 percent from the 1st quarter 2010 total.  Bank-owned properties that sold in the 1st quarter had been repossessed an average of 176 days before the sale, while properties that sold in earlier stages of foreclosure in the 1st quarter were in foreclosure an average of 228 days before they were sold.  According to James J. Saccacio, chief executive officer of RealtyTrac, “While this is probably helping to keep home prices relatively stable, it is also delaying the housing recovery.  At the first quarter foreclosure sales pace, it would take exactly three years to clear the current inventory of 1.9 million properties already on the banks’ books, or in foreclosure.”

Foreclosures are particularly attractive to all-cash buyers who demand discounts,  pushing down the value of all properties.  More than 75 percent of American cities experienced price declines in the 1st quarter.  Bank-owned homes totaled 107,143 sales in the 1st quarter, down 11 percent from the 4th quarter and almost 30 percent from 2010.  Sales of homes in default or scheduled for auction totaled 51,291, a 26 percent decline, according to RealtyTrac.  That was less than half the peak of 348,629 distressed deals in the 1st quarter of 2009.

Writing on the website 24/7wallstreet.com,  Douglas A. McIntyer offers an interesting perspective.  “Any economist will say that when some homes are sold at 27 percent below the normal market, all home prices will be pulled lower.  That may be the key to the home market recovery.  Foreclosure inventory will continue to rise as banks put more backlogged homes onto the market.  The glut will probably push down the average of all homes by several percent. This may be a reason home prices are predicted to fall another 10 percent this year.  Buyers will not come back to the housing market until they believe that prices are too good to resist.  That may mean homes that sold for $500,000 in 2005 will have to sell for $300,000 next year.  Prices will not be driven down quickly without the reduction in inventory of foreclosed homes.  There has to be a bottom to prices.  The sooner it is found the better.  The housing market is more than half dead.  The only tonic is a belief by buyers that prices are so remarkably low that new buyers will make money on a house and not lose it.  If the housing market is to continue to drop, the drop needs to be swift.  Mortgage rates are near all-time lows.  Inflation and concerns about the value of Treasuries due to the U.S. national deficit could change that.  Home prices that are viewed as affordable need to be married with low mortgage rates for the market to catch fire.”

Follow the March Madness Money

Monday, April 4th, 2011

March Madness is so popular among American sports fans that even President Barack Obama was featured on ESPN filling out his brackets. The President, who predicted a Men’s Final Four of Duke, Kansas, Ohio State and Pittsburgh, said “One thing I wanted to make sure is that viewers who are filling out their brackets — this is a great tradition, we have fun every year doing it.”

According to Investopedia, like so many things in American popular culture, March Madness is an exercise in follow the money. “While many consider the annual NCAA Division I Men’s Basketball tournament to be one of the greatest tournaments in sports, there’s more to the madness than just the teams battling for their place in the Final Four.  Like all great sporting events, the tournament has its share of economic impacts on a variety of levels.”

For example, the CBS television network controlled the March Madness airwaves for years; in 2011 a landmark deal was made to allow Time Warner’s Turner to split the rights for the next 14 years at a cost of approximately $10.8 billion.  “Along with the steep price tag comes the revenues from broadcasting the tournament both on television and via other media outlets,” Investopedia said.  “Last year, CBS is estimated to have raked in about $620 million from TV advertising alone, while revenues from ‘non-traditional’ sources were up 20 percent.  Even with more people watching their favorite television shows in non-traditional ways, sporting events have still managed to keep live viewership growing, and there’s nothing quite like the nail-biting thrills of a last-second jumper.”

Then, there are the schools.  According to Forbes, “The NCAA distributes money from their media contracts to Division I conferences based on their performance in the Division I Men’s Basketball Championship over a six-year rolling period.  Independent institutions receive what’s called a ‘full unit share’ for every game they play in the tournament over the same rolling six-year period.  The basketball fund payments are sent to conferences in mid-April each year, and then conferences allocate the money as they see fit.  Some conferences equally split the revenue among all conference schools, while some provide a disproportionate share to the teams that were actually responsible for the ‘unit creation.’  One ‘unit’ is awarded to a conference for each game a member school participates in, except the championship game.  In 2009-10, each ‘basketball unit’ was approximately $222,206 for a total $167.1 million distribution.  The 2010-11 season was supposed to be the last year of the old TV contract, where CBS was slated to spend $710 million for media rights.  Based on this figure, the NCAA estimated that each ‘basketball unit’ would be roughly $239,664 for a total $180.5 million distribution.”

Sports tourism is another way that March Madness stimulates the economy.  Because the games are played in various locations across the country, teams and their fans spend money on hotels and restaurant meals, a positive economic impact on the host cities.  The biggest winner of 2011 is expected to be Houston, where estimates have direct spending by March Madness fans hitting $100 million.  Denver, Cleveland and New Orleans are also expected to reap significant economic benefits.

March Madness also offers Americans an opportunity to gamble.  According to Sportsbook.com, approximately $75 million was bet in Las Vegas on the tournament.  Office pools totaled more than $3 billion, with the cost of lost productivity estimated to be approximately $1.8 billion.

House Sales, Prices on the Upswing

Wednesday, December 9th, 2009

Home prices nationally are on the rise again, according to a new report issued by the Standard &Poor’s/Case-Shiller Home Price Index. The average sale price rose 3.1 percent during the third quarter of 2009, the same percent increase reported during the second quarter.  On the downside, that statistic is still nine percent lower than the number reported one year ago.

In Chicago, prices rose 1.1 percent from August on a seasonally adjusted basis.  Local prices were still 10.6 percent below the level reported for September of 2008, the fifth consecutive month to report an increase.  At the same time, Chicago-area home sales jumped by one-third in October, compared to a year ago, according to the Illinois Association of Realtors.   The group cited lower home prices, affordable mortgage rates and the federal tax credit for first-time buyers as reasons for the rise.

According to David Blitzer, chairman of the Index Committee at Standard & Poor’s, “We have seen broad improvement in home prices for most of the past six months.”  Case-Shiller’s 20-City Composite index rose 0.3 percent compared with the August numbers.  The city with the worst-performing market is Las Vegas, where prices have fallen for 37 months in a row and now are 55.4 percent off their highs.  Chicago home prices rose 1.2 percent during the third quarter.

In another snapshot of the housing market, a report from First American CoreLogic revealed that nearly 25 percent of all mortgage borrowers are underwater.  This condition, as well as the high number of foreclosures, raise doubts about the staying power of the recent upward price trend.

Las Vegas Underwater

Monday, June 1st, 2009

Las Vegas may be in the middle of a desert, but right now it’s underwater.  Fully two-thirds of the once fast-growing city’s housing stock is underwater,  meaning that the owners owe more on their mortgages vegasthan the home is worth.

According to www.zillow.com, borrowers who are underwater totaled 20.4 million at the end of the first quarter of this year, compared with 16.3 million at the end of last year.  This represents 21.9 percent of all homeowners.

The irony in these numbers is that falling prices are making homes more affordable for first-time buyers who previously were shut out of the housing market.  At the same time, the decline in home prices compounds problems for owners who get into financial trouble by making it harder for them to refinance and take advantage of the current low interest rates.

“What’s going on here is that you don’t have any markets that have turned around and you have new markets, like Dallas, that have joined the ranks of communities where home prices have fallen,” noted Stan Humphries, a Zillow.com vice president.

Zillow.com reports that the nation’s top 10 underwater cities are:

  • Las Vegas, NV                    67.2 percent
  • Stockton, CA                       51.1 percent
  • Modesto, CA                       50.8 percent
  • Reno, NV                             48.5 percent
  • Vallejo Fairfield, CA       46.5 percent
  • Merced, CA                         44.4 percent
  • Port St. Lucie, FL              43.5 percent
  • Riverside, CA                     42.8 percent
  • Phoenix, AZ                        41.7 percent
  • Orlando, FL                         41.7 percent

Housing Prices Decline Sharply During July

Friday, October 17th, 2008

Housing prices in the United States plunged a record 16.3 percent during July, compared with the previous year.  According to Standard & Poor’s/Case-Shiller Home Price Indexes, this indicates an ongoing home-price decline now in its second year.

The S&P/Case-Shiller composite index of 20 metropolitan areas declined 0.9 percent in July, when compared with June.  That represents a 19.5 percent decline since the housing boom peaked in July of 2006.  According to S&P, the composite index of 10 metropolitan areas fell 1.1 percent in July, representing a 17.5 percent year-over-year decline.  Compared with 2006, the index is down 21.1 percent.

“There are signs of a slowdown in the rate of decline across the metro areas, but no evidence of a bottom,” said David Blitzer, chairman of S&P’s index committee.  Economists see declining home prices -as a result of foreclosures – as one of the biggest threats to America’s financial system and economic growth.

Declines on Las Vegas – the nation’s weakest housing market – hit 29.9 percent compared with last year, and 34.3 percent when compared with its August of 2006 peak, according to S&P.  Yearly declines for Phoenix and Miami were 29.3 percent and 28.2 percent in July, respectively.