Lenders' short sales may rise

The inventory of bank-owned homes in Las Vegas is shrinking and the market will lean more toward short sales in 2012, Prudential Americana Group owner and broker Mark Stark said.

Lenders have to reconcile with political pressures in a national election year, a new Nevada law clamping down on fraudulent foreclosure filings and a stagnant economy, all of which will affect the local housing market, Stark said.

It shouldn't significantly deter the upward swing from 2011, he said.

"I see much of the same in 2012, which is a really good thing," Stark said. "One thing we have going for us is affordability."

The numbers show stabilization in Southern Nevada's housing market. Existing-home sales are up, driven primarily by investors buying at bargain prices. There could be a slight price influx, but nothing significant, Stark said.

The Greater Las Vegas Association of Realtors reported 89,266 transaction "sides," or agent representations for both the buyer and seller, through November. That's 44,633 home sales.

Prudential Americana, which acquired Century 21 MoneyWorld in Las Vegas and Prudential Arizona Properties in 2011, captured a 9.6 percent market share of those closings with 8,620 sides, Stark said.

"I see no reason why those numbers won't continue to increase, with the economy moving in a positive direction and if we don't have any unforeseen challenges," Stark said. "I'm not looking to kill a bear. Growth will be internal. If you depend on the market to grow, you've got a problem. You can't live like that. You should be able to move the company forward even if the market stays flat."

Realtors are closely monitoring notices of default, the first step in foreclosures, after Assembly Bill 284 became law on Oct. 1. The law aims to hold lenders accountable for providing required documents to foreclose. It has slowed notices of default filings in Southern Nevada.

There has been a notable shift away from real estate-owned, or bank-owned, closings in favor of short sales and traditional sales, which is consistent with the contraction of REO listings, Stark said.

Las Vegas-based SalesTraq is showing a bank-owned inventory of 6,405 homes in November, down about 50 percent from 12,581 in the same month a year ago. Homes for sale on the Multiple Listing Service without a contingent offer decreased to 11,086 in November from 15,855 a year ago, with 47 percent of them listed as short sales.

Rick Brenkus of Keller-Williams Realty sees some positives for the Las Vegas housing market in 2012, but also some concerns. Chief among them is the reduction in REO inventory because of AB 284.

"That's creating a little slowdown but I think the banks will work through their shadow inventory first. They'll find a way through this process," Brenkus said.

On the positive side, mortgage interest rates are at a 50-year low, and short-sale candidates will take advantage of the Debt Relief Act that expires at the end of 2012, he said. The act eliminates second-mortgage debt on short sales, or homes sold for less than the mortgage owed.

"That may equalize the inventory with less REOs and more short sales," Brenkus said.

Brenkus and his team completed about 300 sales transactions in 2011, consistent with 2010 numbers. He expects to see an uptick in short sales this year as banks have streamlined approvals. Whereas short sales took eight months to a year to get approved a couple years ago when they were new to the market, some are completed within a week now, Brenkus said.

Median home prices will probably stay where they've been the last six months, between $120,000 and $125,000, he said.

With all of the outside market influences, 2012 will be the toughest year yet for Las Vegas, said Steve Hawks of Platinum Real Estate Professionals. The revamped Home Affordable Refinance Program, foreclosure rental programs and AB 284 will all greatly reduce inventory, he said.

"We definitely will start the year out very low on available inventory and that trend will continue past the election," Hawks said. "As of today, there have not been any major banks to file notice of defaults. If that continues much longer, it will cause an artificial shortage of inventory."

Homeowners who aren't faced with the threat of foreclosure, or notice of default, will hold off putting their homes up for sale, he said.

There will be a "bump and dump" cycle in 2012, much like the tax credit cycle, as banks figure out how to deal with new law, either by judicial or nonjudicial foreclosure. This artificial spike will give flippers an unprecedented opportunity to lock in profits, the real estate expert said.

Short-sale volume will be similar to 2011, about 900 to 1,500 a month, Hawks said. The percentage may be higher because fewer bank-owned homes and trustee sales are put on the market.

Short sales didn't increase in other states where similar laws were passed. Foreclosures still outnumber short sales in Florida and New Jersey, where it takes more than 900 days for banks to foreclose.

"To increase short sales, states need to look to the federal level," Hawks said. "The government's own watchdog has admitted that all these HARP and HAMP programs have delayed the housing recovery and 2012 will be another delay."

Anthony Martin of LV Default, a company that buys investment homes at trustee auctions, said the temporary drop in notices of default probably won't affect the pipeline dramatically. It's only expected to create a 10 percent to 20 percent drop in trustee sales starting in February , he said.

"Many banks canceled sales and never brought them back again as an NTS (notice of trustee sale)," Martin said. "They are what I call 'vapor foreclosures' because they are floating out there in limbo, waiting for the bank to make a decision as to what to do with them. Many of those homes -- tens of thousands of them -- may be coming back around during this thin calendar period. After all, the banks have to generate money somehow to keep making those new loans."

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.

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Comments

Note: Comments made by reporters and editors of the Las Vegas Review-Journal are presented with a yellow background.

1. Jim.Allnutt Dec. 31, 2011 | 2:14 a.m. Report Abuse

   I'm an investor from Calif. I bought a few rentals in 2003 paid them off in 2008 and started buying for cash in 2009 after the market crashed and I could buy the same houses for half of replacement cost. The rent provides a 10% return on my money. The fact that 90% of your comments are negative from a contrarian standpoint is great and I know it is still time to buy more. When 90% of you say evrything is great, I will then look to "cash in the chips" as they say in Vegas. My advice to first time buyers, buy a nice $80,000 home (1,500 sf 3 +2 one story 2 car garage)and take out a 10 year loan and just pay the dam thing off in 10 years and be done with it. Values in N.
   Las Vegas are back to 1985 levels. Sometimes people can't see the forest for the trees. As to those who prefer to rent for 5 years and pay $1,000 per month, all the investors out there including myself thank you everyday.

2. JohnDoe2b Dec. 27, 2011 | 9:43 p.m. Report Abuse

   Why would anyone buy a house today if it will almost surely decline in value in the next five years ? This market has not bottomed out. and buying now is like trying to catch a falling knife. Irrational.

3. skilvnv Dec. 27, 2011 | 3:05 p.m. Report Abuse

   Hey, there are some good deals out there. Find a free & clear house and have the seller finance it for you. It is alot less than renting and having to deal with these Ahole managment companies. Too much negativity from people on this boards. Come on get rid of your doom and gloom. Put down your beer and remote, get off the sofa, go for a jog stop smoking, and have some self respect. You are your own worst enemy. Go help out some less fortunate people and quit your wining.

4. Candystriper Dec. 27, 2011 | 2:57 p.m. Report Abuse

   This morning Shiller told Fox Business that if Europe crashes US home prices will decline sharply in 2012. He also said if Congress takes away the interest mortgage deduction home prices will be destroyed. Declining home prices are having a terrible effect on consumer confidence and employment.

5. Blond.Bimbo..Realtor Dec. 27, 2011 | 2:56 p.m. Report Abuse

   Hi boys and girls, its me again, your Blond Bimbo Realtor! How is every one doing in this exciting market (-: ___My assistant, the lil blond bimbette, had an observation she wanted to share. The realtor in the picture, Prudential Americana Group Realtor Kelli Woolston, isn't a blond so lil blond bimbette thinks that the reason she is taking down the sign is because she lost the listing to a blond realtor with a sweet little smile. She wanted to share that, not me.... So how are my under water buyers doing? never forget, when life serves you lemons, make lemonade! Could be worse, so smile!!! To Long Time.Nevadan, don't be so mean to my banker buddies, at least they are nicer than those payday loan companies. The banks won't call their Uncle Vinny to collect, just kick you out and on the street.

6. pmmart Dec. 27, 2011 | 2:45 p.m. Report Abuse

   "Rent, save up your cash, and buy something 20% cheaper in 5 years."
   Rent for 5 yrs. at 1,000 per month means that you will pay 60,000 rent in 5 yrs. and you suggest that one should save on top of it?
   Why not buy a discounted home today at record low interest rates and pay extra every month [the money you suggested one should save] and I'll bet that the home owner is going to come out way ahead of the rent and save guy....WAAAAAAY ahead!

7. Long Time.Nevadan Dec. 27, 2011 | 2:33 p.m. Report Abuse

   @Manny-
   What the banks do make perfect sense. If they `worked' with you to reduce your principal, every other homeowner would insist on the same thing (even those current on their loan), and it would balloon out of control. Additionally, some of that bad loan is either guaranteed by the feds or a private insurer. Bottom line, they are more than eager to kick you out than negotiate (which is their right). A friend who works in the industry tells me that the view of defaulting homeowners is that of scum and worthlessness. There is satisfaction in kicking these people out, equating them as dishonorable low lifes. If they could extract their `pound of flesh', there would be one heck of a wound on every foreclosed homeowner. Sorry, but that is the facts. (Don't expect a helping hand if Romney wins in November. He is on record as to wanting the free market to play out without fed interference..translation--the sooner the banks can kick out deadbeats, the better.

8. Long Time.Nevadan Dec. 27, 2011 | 2:25 p.m. Report Abuse

   This is sure depressing for any homeowner that is expecting a `bail out' of their under-water misfortune. Best you can hope for is a short sale (yes, you lose your house and your credit is wacked, even if the bank `forgives' your loan balance). About the only way you will get another house is to write a check for it (that clears) or get ready to pay a much higher interest rate, PMI, and have a nice down payment. In order words, welcome to the world of trailer parks or apartments. If you are a buyer, have no plans to move in the next decade or so, a home may be better than rent if you are a gambling man (prices can still drop or your new neighborhood could go down the toilet and you may be stuck). Ahhh....Viva Las Vegas

9. Manny.cuaresma Dec. 27, 2011 | 1:52 p.m. Report Abuse

   There would not be these much foreclosures and short sales if banks are willing to work with homeowners.
   Most homes in the valley are upside down and most homeowners who bought their homes 3 to 5 years ago are finding their mortgage payments doubled or worse because of the adjustable rate mortgage (ARM).
   Most homeowners will prefer to stay in their homes if banks will only work with them to modify their loans based on the value of the house.
   But banks would rather foreclose homes and lose money rather than modifying loans based on the true value of the house and to me, that makes no sense.

10. JohnDoe2b Dec. 27, 2011 | 1:49 p.m. Report Abuse

    Articles using real estate touts as sources are invariably too optimistic. This article overlooks the reason why prices must continue to slide for a few more years. The population is stagnant, there are perhaps 200,000 vacant homes, unemployment is high and state and local governments are strapped. The bottom line is there is no good reason to buy a house in Las Vegas right now. Rent, save up your cash, and buy something 20% cheaper in 5 years.

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