A combination of aggressive mortgages, maxed out home equity lines, and dropping home prices mean that home equity rates in the United States have fallen below 50% for the first time since World War II.  This is of course related to housing being in the “deepest decline since the Great Depression.” There has actually been a major shift in the priorities of debtors, and homeowners are more willing to walk away from their homes than ever before.

This of course means that lenders are becoming more risk-averse — they don’t want to loan money that Joe Borrower might not pay back, and they really don’t want to worry about liquidating Joe’s house down the road.  In fact,  not only are people with good credit having trouble getting refinancing, you can’t get financing at all in some areas for certain kinds of real estate.  For example, if you want to buy one of those 800 high-rise condos currently available in Las Vegas, make sure you have a large cash down-payment.  I can’t blame the banks for not wanting to get involved in what is essentially a niche market, but it does make life “interesting” in our local real estate market.

Even if the current housing problems are not over, I find it very encouraging that pending sales were unchanged — not lower! — in January on a nationwide basis. On a local basis, things are doing even better here in the Las Vegas Valley (many thanks to Tim Kuptz for making sure this data is regularly available to the people who want facts instead of vague impressions).  Bargain hunters are swooping in trying to catch REO (foreclosed and bank owned), short sale, and vacant property at prices that they haven’t seen in years, knowing there is a finite amount of buildable land in the Valley.

Also encouraging on the national level is that the FHA has come out with the new conforming mortgage limits, adjusted for regional conditions.  You can find your local limits here;  in the Las Vegas Valley, it’s $400,000 for a single family home, last revised this past Wednesday, March 5, 2008.  Trust me, I can help you find a nice place to live for $400,000;  what part of town do you like? The FHA getting involved is great news, because everyone expects them to ride in for the rescue, much like they did in 1935.

In the meantime, this might be a great time for some renovations,  but remember these bits of advice:

To ensure that your renovation will pay off, make improvements that others will appreciate as much as you do….  [Some] projects… are a matter of personal taste, and they may not add value in the eyes of a future buyer…. Also, don’t compromise long-term value for short-term convenience.

How true.