U.S. Home Builder Confidence Reaches 7-Year High

It has been almost eight years since homebuilders could be described as "optimistic" about the future of new home sales. But, in the builder sentiment index released by The National Association of Home Builders and Wells Fargo from May of this year...they were. The survey measures customer traffic at new home sites, sales conditions, and projections for the future. For the first time since before the market collapsed, more builders rated these conditions as good rather than poor. With interest rates remaining reasonably low, to spite recent advances, and current inventory continuing to be light, builders are beginning to feel good about the future of new home sales.

Just another domino it seams in the housing market's break neck race towards new highs...especially in Las Vegas. Nat Hodgson, executive director of the Southern Nevada Home Builders Association, recognizes that the current boom in new housing in Sin City traces back to the passage of AB-284. Recognizing that this bill would slow foreclosures, and with buyers struggling to find any available inventory, builders rushed to apply for permits. "We're very encouraged by the local economy," Hodgson said, "We're no longer looking down at the bottom. We're looking up to get out of the hole we dug ourselves into."

Yeah. Maybe.

Or maybe we are setting ourselves up for another hole. Many economists have noted that the rapid rise in Las Vegas home prices seems to have very little to do with an improving economy. They have wondered aloud at the feasibility of these gains continuing.

The bottom line is that real estate continues to be very volatile in Las Vegas.  I'd love to tell you that you can come to our town, purchase any piece of real estate, put a renter in it, sit back and make money.  And three years ago you could do pretty much just that. But times have changed.  There are still deals to be had in Las Vegas real estate.  But you have to know where to look, and you have to be careful. I understand this market because I have invested in it, and sold profitable properties to my investor clients, through all the ups as well as the downs. If you are interested in investing in Las Vegas real estate, call me.  We should talk.

North Las Vegas Approves Proposal to Seize Underwater Homes Using Eminent Domain

 

 

On the surface it looks like a win-win proposal.  The City of North Las Vegas has seen revenues plummet over the last several years as a result of the huge rate of foreclosures in the city resulting in lost property tax revenues.  In fact, North Las Vegas very narrowly avoided bankruptcy last year. At the same time, North Las Vegas homeowners are suffering under the highest rate of upside down mortgages in Clark County, and one of the highest in the nation. An unconventional plan appears to propose a solution to both problems. How does it work? Under the controversial plan proposed by San Francisco based consulting firm Mortgage Resolution Partners, the City of North Las Vegas would seize thousands of underwater homes using eminent domain provisions (the same provisions used to seize property that lies in the way of interstate expansion, etc.) The city would then pay the banks (or private investors as MRP likes to call them) a fraction of the amount owed on the property and would restructure the debt and resell it to another “private investor” at a lower principle balance.  For this service, both MRP and the City of North Las Vegas would take a fee as a percentage of the loan amount for each and every home seized in this manner. The idea is that homeowners end up with a home loan with a principal balance closer to the actual current market value of the home, the city makes money, MRP makes money, and the only loser is those pesky banks we all love to hate.

What could possibly go wrong?  A lot actually.

First, there is the issue of litigation. Examiners of the bill testified before city council yesterday and noted that the possibility of litigation from the private investors who currently own the mortgages in question is very high.  Ward 4 councilman Wade Wagner, the only council member to vote against the bill, noted “There’s a lot of unanswered questions. But I think the only thing it (the bill) guarantees is a lot of litigation for a lot of years.” Second, there’s a small problem with the potential legality of the plan. Nevada Bankers Association President Bill Uffelman noted that there are legal limits on the amount of property the state can seize through eminent domain and then transfer between private parties. There’s also the matter of selling these restructured mortgages at the end of the deal. I have to personally wonder how many banks and other “private investors” will be lining up to buy mortgage backed securities for mortgages that were non-performing to begin with and which were seized in a manner that resulted in a huge loss for the investors who held them originally.

Of course the final issue that no one seems to want to address is the issue of morality. I am as much for saving people’s homes as anyone. In fact, when I first read about this plan my initial reaction was very positive.  I thought, “Great! These people will be able to stay in their homes.  The government hasn’t been able to help them, the banks won’t modify their loans, this is great for them.” And it is. But at whose expense? Our society has become so comfortable with vilifying “big corporations” and banks as the bad guys that we sometimes neglect to see the forest for the trees.  Banks are what drive our economy.  Without banks lending money we wouldn’t be able to buy homes, or cars, or pay for college. Without banks lending money the housing industry will very quickly grind to a halt.  And yet, we seem perfectly willing to hand over millions of dollars to MRP to help us stick it to the banks whose major crime seems to be that they loaned money to us to begin with.  Silly them.

The Las Vegas Housing Market Isn't All Good News? What?

I've sort of started to feel like a stick in the mud.  Median home prices are rising meteorically in Las Vegas, inventory remains ridiculously low, and foreclosures seem to have simply faded into the sunset.  New home starts are moving back to pre-bubble levels and everything seems to be coming up roses for the Las Vegas real estate market.  So why do I keep raining on the parade?  Well, lots of reasons really, you can read my previous blog posts/press releases for all of them, but I was happy today to see a report from the Nevada Department of Business & Industry that makes me feel a little more justified in my cautionary outlook.  It's not that I'm saying that Las Vegas real estate isn't improving, it's just that I'm encouraging my clients to proceed with caution, because the market has not fully recovered.

The new index released by the Department of Business & Industry seems to agree with me. The Nevada Housing Stability Index was just unveiled.  It is a report designed to use multiple markers to evaluate the true strength or weakness of the real estate market.  It is interesting to note that even with all the positivity circulating lately, Las Vegas earned a D+.  Yep, you heard it right...a D+.  Coincidentally, had the measure been available at this same time last year, we would have earned a D.  That's not a huge improvement.

So what's dragging us down? A few things actually...nine to be exact. Nevada lags behind average in the following categories: percentage of homes under water, share of investors, foreclosure volume, delinquency rate, housing affordability and availability and four others. Nevada received middle of the road marks for distressed home sales, and our only two high marks were for balance between supply and demand and demand for new construction.

So where now? You can look at the report two ways.  First, it ought to remind us all to proceed with caution.  It remains a great time to invest in Las Vegas foreclosures and other real estate, but you need to work with a professional who can help you evaluate cash flow on your potential investment and make sure that you are in a solid position to endure market fluctuations.  The second way to view the report is that there is lots of room for improvement.  This bodes well for investors who are afraid they've "missed the boat" so to speak.  It would appear that we have a lot of upside ahead of us still in the Las Vegas market.

If you are interested in learning more about Las Vegas foreclosures or other real estate investments, contact Glenn directly.

Catherine Cortez Masto Vows to Ensure Punishment of Banks Continues

OK, well maybe that's not exactly how she put it.  But I'm pretty sure that's what she means.

Nevada Attorney General Catherine Cortez Masto summarized a report released earlier this month saying that the report shows that the largest mortgage servicers in the U.S. are not complying with "several key aspects" of the settlement imposed on them by the court. These key aspects include regulations designed to streamline the loan modification process, improve customer service, create single points of contact for consumers within the bank, and eliminate billing and statement inaccuracies. Several of the large banks including Citi, JP Morgan Chase, Bank of America, and Wells Fargo were cited for compliance issues. If the banks do not adequately address these issues they can be hit with more fines. More fines in addition to what you might ask?

In addition to the fines issues to the major banks designed to "recompense" Nevada homeowners. It is estimated that mortgage providers have refunded an amount in excess of $1.8 billion to Nevadans in the last several months as a result of this directive. I've seen this in action. One of my colleagues walked into the office a few weeks ago with a check for almost $1500. She was a little puzzled.  "Why am I getting this?" she asked me.  "All I did was not pay my mortgage and let the bank foreclose on my property. I don't really feel like I deserve to get money back. (pause) Of course I'm going to take it." Well sure. I would take it too. But I agree with her. We wouldn't deserve it.

I continue to find Ms. Cortez Masto's insistence that the banks should be treated as whipping boys to be a little bit puzzling. I recognize that the banks engaged in bundling of securities and re-selling that were, let's say, less than transparent. But let's be realistic here for a minute.  Why did my colleague with the $1500 check lose her home?  Was it because the banks did something awful to her? No. It was because home prices plummeted and she was laid off from her job. Not really Citibank's fault.
Regardless, it appears that Nevada homeowners may benefit from these regulations in some way if more loan modifications can be initiated on the huge percentage of homes that are still underwater in Las Vegas. Another option this year is the short sale. If you are still underwater on your home, and looking for a way out, you need to consider short selling immediately. It is very unlikely that the tax forgiveness program currently in place for mortgage debt will be extended for another year. That means that the time to sell your property is NOW...so you aren't hit with Federal income taxes on the difference between what your home is worth and the amount you still owe on your mortgage.  If you don't know what I'm talking about, call me and I will explain to you why the window for short sales is closing in Las Vegas.