Let’s imagine a nice little community of 400 homes. It’s a perfectly average American community, and it could be anywhere: in town, in the ‘burbs, in the countryside.

Thanks to the often-cited statistic that 68% of Americans own their homes, we can deduce that perhaps as many as 32% are rental homes, or 128. However, we are going to assume there is an apartment complex down the road, and that only a third of that number are in fact rental homes. We’ll round down to 42.

Because it is a perfectly average community, roughly 5% are currently available. Most of them are for sale or lease. A few have sales/leases pending — the sign is still up, but only because the deal hasn’t actually closed yet. Another few are being prepped for sale/lease, but frankly if you made the owner an offer out of the blue he or she would likely take it.. That’s 20 homes. A lot of these homes are currently not occupied.

Right now, 2 of them are in foreclosure, like one out of every 194 homes nationwide — more than double last year’s figure. Once the bank takes them back, they will be added to the list of homes currently available.

In addition, since 6.8% of American homes are currently financed at least in part with a ARM sub-prime mortgage, there’s 27 homeowners that don’t know what their payment will be next year. Since there are 75.1 million home owning Americans and “over 7.5 million first-lien subprime mortgages outstanding”, you can see that one out of every 10 homes in this average community are involved in the subprime mess in one way or another. That’s 40 homes. There is reason to suspect that a disproportionate number of these homes are currently rented, because a lot of investors had to resort to subprime lending. Suddenly, Hope Now’s efforts seem quixotic.

So let’s take a look at how this could play out in the next few months. Those two foreclosures alone will drive our available homes figure to 22, an increase of 10%. This doesn’t seem like a big deal in one community of 400 homes, but multiplied out across a metropolitan area, it can be huge. The bank does not particularly want to own this property, and in many cases is willing to sell at a loss. This drives down prices across our community: why would buyers pay more to a private owner, when they can get a comparable bank-owned home for less?

This in turn creates another problem for our homeowners with subprime and ARM mortgages. Some of those people would like to refinance, but can’t. Some now owe more than the current market price; that combined with whatever personal financial issues resulted in them having this mortgage in the first place prevent them from getting affordable refinancing. Some of these people are going to have to sell their homes, if not simply walk away. If as few as 2 of them do so, we have raised available housing by a total of 20% across the community.

We haven’t even discussed the impact of a major lender going out of business. While the mortgages owned by such a lender would be sold off — they are assets, after all — that would reduce the pool of available lenders, and available funds with which to make mortgages for honest, bill-paying homeowners. It obviously also reduces the money available to people trying to refinance. In a nutshell, that is why the government has to “bail out” some lenders: not because we are rewarding their bad behavior, but because of the impact on the public.

Most of the currently discussed legislative solutions focus on owner-occupied homes. The reasoning is that investors should have known better and it’s only fair that they sleep in the bed they made. This reasoning fails to account for the decent, rent-paying residents of our community. If these homes are foreclosed upon, the leases are generally terminated, leaving the resident to scramble for a new home through no fault of his or her own. Does that seem fair to you? Furthermore, by leaving these homes out of the “solution”, we have the potential of adding dozens of homes to a real estate market that normally only has 20 available units. The law of supply and demand suggests that is a recipe for plunging prices, a problem which already exists.

Problem exacerbated by the solution.

But what if our community isn’t perfectly average? According to the latest foreclosure data:

In the first quarter, 1 of every 54 homes in Nevada received some type of foreclosure filing – more than any other state. Its largest city, Las Vegas, had 1 out of every 44 homes go into foreclosure.

Stockton, Calif., had the highest foreclosure rate out of any U.S. metro area, with 1 out of every 30 homes receiving a notice – nearly seven times higher than the national average. The Riverside/San Bernardino region had the second highest rate in the quarter, with one of every 38 homes in default.

Only two metro areas in the ranks of the 20 hardest hit were outside the Sunbelt – Detroit, which ranked sixth in the nation with 1 in every 68 households in default, and Cleveland which saw 1 in every 105 homes go into foreclosure.

That means that if our typical community is in Nevada, there’s 7 homes in foreclosure; if it’s in Las Vegas, there’s 9; Stockton, there’s 13; Detroit, there’s 5 or 6; Cleveland, there’s 3 or 4. Multiply all the problems above accordingly. And keep in mind that these problems are currently impacting the economy in a negative way.

Any real legislative solution to these issues must take into account all parts of the problem: lenders, homeowners, real estate investors, renters, even home builders and investors who purchased mortgage backed securities. To implement half a solution is worse than no solution at all.

Cross-posted on The Moderate Voice and ShortWoman.

You have probably heard that current inventory of homes available is at a high level, and prices have dropped.  That being the case, some savvy property hunters are out there looking for great deals.  Even though the extraordinary percentage of foreclosures and short sales poses special challenges for prospective buyers, some things don’t change.  One of those things is that buyers need to get into a property to make an educated purchase decision.

So, suppose you already have a great Realtor who has already helped you narrow things down and pick maybe a dozen or two top choices.  Furthermore, that Realtor has already made appointments for you to see some of these homes.  What things do you want to bring with you when you go?

Comfortable clothing, including shoes!  Sometimes you don’t have a lot of choice  in the matter — perhaps this is an impromptu viewing after a particularly good out-of-town job interview — but remember that it could be a long day.  There could be all kinds of surprises.  Would you rather face it in a suit and dress shoes, or a pair of machine washable pants and sneakers?  Don’t forget that you will almost certainly be looking at a lot of back yards too, so remember your sunscreen.

Measuring Tape.  I recommend at least 12 feet, but 25 feet is better.  Sure, the MLS says the room is 10′ X 12′.  It probably is pretty close to that. But is there enough room between the door and the window to fit a particular piece of furniture?   Would you rather find out now, or on moving day?

Flashlight.  Some of the homes you see in today’s market are likely to be vacant. Some of those vacant homes will not have the power turned on.   Some rooms, including the garage, will not get as much daylight as you might like to have for looking around. Even if the home has power, you might want to look around a crawlspace, attic, or some other inadequately lit space.

Clipboard and Pen.  You may see a lot of homes in the course of a day.  Even if you rule the majority of them out, you will still want to take some notes on your favorites such as “carpet must go” or “is 3rd bedroom big enough?” or “have inspector check kitchen window for leaks”. Ideally, you can write your notes on the MLS sheet your Realtor gives you.

Digital Camera is Optional.  Unless, of course, there is a decision maker that cannot be with you!  Some Realtors are hesitant to take you out in such a situation, but many times it is unavoidable. Pictures can make your remote “other half” a real part of this important situation.  Go ahead and take lots of pictures of your favorites.  You can email them to friends, family, or whoever. You will be glad you have these pictures a few weeks later when you are trying to remember whether there was wallpaper in the hallway.

Pre-Approval Letter from your Lender, and a Checkbook.  These days, you can’t make an offer on a house without a letter that says your mortgage is ready to go.  And you certainly can’t make a purchase offer without an Earnest Money Deposit, or EMD.  Sure, you don’t need these things physically with you, but you need to be able to lay hands on them within hours.

Your brain.  It’s easy to fall in love with a house.  It’s also a potential path to disaster.  You can be emotional about your home, but you should not be emotional about your investments; and a house is a huge investment.  People who make this decision based on too much emotion and not enough reason tend to overlook problems and pay too much money.  Look at it with critical eyes, and remember that there are many others for sale.

Good luck.  I’m here to help!

It turns out I am not the only person who is taking a hard look at the various fees that mortgage companies are trying to squeeze out of people. “Slowly but surely, a handful of public-minded bankruptcy court judges are drawing back the curtain on the mortgage servicing business, exposing, among other questionable practices, the sundry and onerous fees that big banks and financial companies levy on troubled borrowers.” Over and above the miscalculated interest, the sloppy record keeping, and the fees upon fees that can keep people from ever being able to put their loans in good standing, some lenders are adding fees back on after judges have tossed them out and discharged a bankruptcy!

The Christian Science Monitor reports that some potential home sellers are deciding not to play the game at all and pulling their property off the market. Eventually these homes will come back, as the owners find themselves needing to sell rather than wanting to. Others will someday decide that the market has improved enough to chance a new listing. Some will sadly end up in foreclosure and become REO properties. Short version, this trend helps shore up supply now but bodes ill for some future date.

And now for a completely different kind of real estate, French lighthouses. Interested in a tough historical preservation project?

Speaking of foreign real estate, you probably don’t know how lucky we have it here in the states in some ways. Let Robert Brady spell it out for you: “Believe me when I tell you that, when it comes to business (that is, the purchase of real estate), the agent you’re working with is not working for you. Buyers’ agents don’t exist outside of North America. In many of the markets I recommend, real estate agents aren’t regulated or even licensed.”

A message to all those Realtors out there: I know about “Realtor Standard Time” and I know that things happen, but you still have to make an effort to be on time. Got that? Would it have killed you to call and let somebody know you were going to be late?

In a move that surprises nobody who has thought about things for a few minutes, economists have found that housing prices have declined most in places where the commute is longest. I suppose if you can work remotely, you can get some screaming housing deals in the far-flung ‘burbs right now. In the meantime, remember that the Las Vegas Valley is relatively small; I can be on the opposite side of town in a half hour…. traffic permitting of course.

And last but not least, two fun if kitschy tours of Vegas: the mob history tour (hey, they’re all legitimate businessmen!); and the haunted Vegas tour.

That’s all for tonight!

Vegas is a lot more than glitz and “sin.” People do more than drink and gamble and go to shows where people are half-naked  Real families live here, real kids are raised here, and they don’t mind having your kids as company!

If you are at a loss for what your kids would do in Vegas, check out this column by Eileen Ogintz, complete with links to more information.  Your kids will have a great time in Vegas. Take a nice hike around Red Rock Conservation Area. Perhaps a day at the Lost City Museum. There are of course amusement parks and roller coasters and food and shopping.  They can visit with sharks and tigers. Or take a helicopter tour of the Grand Canyon.  Don’t like helicopters? How about a tour of Hoover Dam?

In Vegas, you can find lots of ways to spend your tax refund check — without ever gambling.  Just don’t forget comfortable shoes and sunscreen.

Maybe you saw today’s news that pending home sales are at an all-time low… well, a low since the National Association of Realtors started compiling those figures in 2001. It’s down 1.9% from last month and 21.4% since last year! Of course, not all regions had the same performance. To listen to the market gurus talk on CNBC this morning, you would think that a long, dark road is ahead for our nation as they made fun of the NAR for daring to predict yet again that there would be a recovery real soon now. Alan Greenspan even did an exclusive interview with CNBC where he disavowed any responsibility for the current mortgage mess.

Meanwhile, a small chorus of experts is joining me in saying that “Southern Nevada’s housing slump is on the verge of hitting rock bottom, if it hasn’t already done so.” Of course if you have been looking at the actual data for Las Vegas residential real estate on a regular basis (and many thanks to Tim Kuptz for making this available every week in an easy-to-read format), you have already seen inventory start to fall and pending sales start to rise. It’s going to take some time to get through the excess inventory, and it’s going to take time to get back to “normal” levels of short sales and repossessed property (bank owned or “REO”). There may even be a little more room for prices to fall in the short term. However, our housing market on the right track at last. When all is said and done, Las Vegas is still ranked #9 nationally in population growth, and all those people moving here still need places to live.

Let’s start off with Mortgage Concepts Every Buyer Should Know. This important little article is must-read stuff for those trying to become first-time homeowners.

Maybe you knew that once you have a mortgage with a bank, the bank can sell that mortgage? Fannie Mae is a company (and former government subsidiary, it’s complicated) that buys those mortgages, freeing up your bank to lend money to somebody else. Fannie is in the process of tightening the rules on exactly what mortgages they will buy.

If you are losing your home, your mortgage holder might pay you to not trash the place on your way out! So please think twice about stealing the plumbing fixtures or leaving holes in the wall. You could use some cash, couldn’t you?

Speaking of leaving a mess, I was recently showing a bank-owned home where it appears that the previous owner locked the cat inside and let them pee absolutely everywhere. There was just too much pee to be explained by anything else. I can only hope this poor animal had food and water, and was safely removed from the home. For pity sake, please provide for your pets! Even if you don’t see pets as family members (in which case why did you get them?), your kids do. Do you want your kids wondering if you will leave them behind when money gets too tight? The flipside of this problem is that your local animal shelter or rescue group probably has some great new pets hoping to find a new home.

A new book called Greed, Fraud and Ignorance tells us even more about how we got into this mess.

These same problems might play out worldwide, as “Overvaluated housing [is] not limited to U.S.”

And lets close with a group of articles on the things Congress is doing to help the situation: it looks like homebuilders are getting a big tax break (yay for keeping construction workers employed, but the last thing we need is artificially inflated supply of new housing); there is little help for homeowners, well, maybe not even that; and both parties want to get something done so they can look voters in the eye this fall and say they did something. Not that there is a simple fix to this situation that doesn’t involve a time machine, but I’d settle for things that were actually helpful and don’t make the situation worse.

As a real estate professional, I just don’t understand why some people hate apartments. Frankly, any argument you can make against apartment life can just as easily be leveled at condominium life. Complaints about “noisy neighbors on the other side of the wall” and “lousy parking” come to mind.

Furthermore,  the management team of a large apartment community has a vested interest in the continued good condition and good reputation of their property even more than the typical small-scale landlord does.   Do you know who owns the rent house on the next block from you?  No?  But I bet if you look carefully at the sign in front of the apartment complex down the street, the management company’s name is on it.

Many of the “problems” associated with apartments are actually caused by zoning too many units in relatively small acreage: notably traffic issues and neighborhood decline. The impact of putting thousands of families in a couple dozen acres on traffic may be obvious.  The impact on the neighborhood at large, less so.  What happens is that no matter how many families actually need rental housing in a major city, the odds of them actually having jobs or another need to be in or near the “zoned apartment ghetto” is actually pretty small.  The obvious result is too much supply and for existing demand.  This drives occupancy and landlord revenues down from what the investors were promised, and nobody wants the investors to be angry. As a result, Jane Manager gets orders from her supervisor at the management company to fill those units at any cost!  And so Jane rents to people she maybe shouldn’t, who in turn run off her “good” residents.  Maybe she reduces rent, which in turn reduces the amount of money she has for repairs (and make-ready of vacant units), eventually meaning her property is skimping on maintenance.  The cycle continues around the neighboring apartment communities, because Mary Manager and Suzie Manager and Joe Manager are all getting the same orders to fill those units.

While cities that do not have “zoned apartment ghettoes” may have a bad complex with bad management somewhere, they don’t have a dozen of them all crammed next to one another, feeding on the toxic feedback loop of their neighborhood.  Apartments spread strategically through a city creates an environment where people who want or need rental housing can find it in a variety of neighborhoods near the places they want or need to be.  In short, cities that zone intelligently have a chance at having good, well-managed apartment complexes filled with decent, hard-working people who for whatever reason choose not to own real estate.  Such complexes can and do co-exist well with quality housing and a vibrant business community.

And that brings me to today’s City Council meeting in the City of North Las Vegas.  Way back in 1988, the city agreed to let Pardee Homes build a mixed development including single family homes and an apartment complex in what was then the middle of nowhere. Now, they are being held to that agreement and forced to sign off on allowing a 340 unit apartment complex to be built on a 15 acre site in the middle of a neighborhood dominated by single family homes.

And the neighbors are spitting mad.

I don’t get it.

Granted, that’s 23 units per acre.  According to the Clark County website, “Maximum densities allowed in most districts range from 18 to 50 dwelling units per acre, though more density is allowed in the district that includes the Strip.”  So by Vegas standards, 23 units per acre isn’t such a big deal.  I know from experience you can have a very nice 200 unit complex of 2 story buildings on roughly 6 acres, so theoretically a clever planner could fit 500 units on 15 acres and never have a third floor unit! We aren’t talking about a “zoned apartment ghetto” here;  we are talking about one complex on more than enough land, in a rapidly growing area minutes away from a retail hub and a brand new hospital.

This area needs rental housing, badly, and somebody realized that back in 1988, even if they can’t see it now.