Yahoo and the Human Capital Institute asked “Imagine you were offered a dream job that required you to relocate to your favorite city. Which city would it be? And why?” Scroll down to see how Vegas fared:

Affordability, which was No. 4 in last year’s list, is now the second-most important attribute workers consider before relocating, thanks to the economic downturn. Affordability might have something to do with the fact that Las Vegas, where home prices have fallen faster than in most cities, climbed to fourth place on this year’s list of America’s favorite cities.

Thinking of a Real Estate Investment?  Then you’ll want to read this piece on Questions to Ask Property Managers before you sign any management agreements!  For that matter, some of these questions are things potential renters might want to know!

The Next Wave:  You’ve heard about several major retailers declaring bankruptcy.  You’ve probably noticed a bunch of little retailers closing their doors too.  But what effect will this have on the real estate market? Well, it won’t be good:

The number of late payments and defaults [by business owners on their leases] will double, if not triple, by the end of next year, according to analysts at Fitch Ratings, which evaluates companies’ credit. “We’re probably in the first inning of the commercial mortgage problem,” said Scott Tross, a real estate lawyer at Herrick Feinstein in New Jersey.

That’s bad news for more than just property owners. When businesses go dark, employees lose jobs. Towns lose tax revenue. School budgets and social services feel the pinch.

Will this turn into disaster?  Or an unexpected opportunity for people who thought they couldn’t afford a lease to open their dream business?  Only time will tell.

And one last thing:  In this season we remember those who don’t have what we have.  When you plan your charitable giving, please remember Child’s Play, a charity that gets toys and games into the hands of children in hospitals. 

I’ve been studying the latest information on the Las Vegas housing market. This week, we had just under 17,000 single family homes available, and an additional 4500 condos and townhomes. Sure, prices are down almost 30% over last year, but actual closed sales are up over 40% from last year. That’s simple supply and demand: prices dropped low enough to stimulate demand.

I am still concerned about the fact that rental inventory is pretty slim, but it’s up from where it was a couple months ago as investors are starting to snap up some fantastic deals in the under $150,000 range. This is in turn creating a competitive market for young and working-class people who are using this opportunity to purchase their first home in the mid $100k range. “Lowballs” just aren’t being taken on homes listing below about $250,000.

Every once in a while, somebody will ask me “Who is to blame for the current housing and foreclosure mess?”  Usually they want a short, snappy answer.  The truth is that there is a giant pie of blame, and there’s plenty to go around.  In no particular order, here are some of the culprits.  This is my opinion alone, and you are welcome to disagree with me.

Fannie Mae. The Federal National Mortgage Association, shortened to FNMA and then simply Fannie Mae, is a federally chartered entity designed to encourage home ownership primarily by purchasing mortgages from other institutions.  That meant that your local savings and loan would have the money to make new loans in your neighborhood.  That by itself is not the problem;  until recent years, they and sibling corporation Freddie Mac were only allowed to buy certain mortgages that met very strict criteria — so-called “conforming” mortgages.  The old girl has been urging people to buy a house for years, selling us a bill of goods that somehow or another our lives would be magically improved by home ownership.

The economy. The sad truth is that wages have not kept pace with inflation for almost all of this decade, inflation has been under-measured, and housing prices have gone up much faster than inflation!  Joe Average could not have caught up to the curve if he wanted to.  The economy also got a lot of people into situations where they had to take out second mortgages or equity lines of credit to pay the bills. This left them with little equity and a higher mortgage bill.

Stupid accountants. I have actually had people tell me their accountant told them to buy a bigger house for the interest deduction!  The money you “save” with this deduction is only the amount you spent on mortgage interest (not principal) times your tax bracket.  Let’s say for simplicity that you have a $1300 per month mortgage and $1000 of that is interest.  If you are in the 28% tax bracket, you are spending $1300 per month, your monthly tax savings is only $280.  If you would have spent $1300 per month renting, then fine, you saved money at the end of the year.  Many would argue that if you are spending more than $1020 on rent it’s coming out ahead.  Many people doing this math forget to account for the additional $280 out of pocket each month.  If you are “just getting by” paying $1100 per month, this “savings” will bleed you dry.

An unscrupulous minority of mortgage brokers.  Most mortgage brokers that I have known have done great work trying to get people into affordable mortgages and been brutally honest with clients about exactly how much they can afford (that’s why I prefer that clients get their pre-qualification letter before we even start looking).  However, a few mortgage brokers have been all about the fees at the end of the deal, and will do anything to get it done.  Even when that means putting people into a mortgage they can’t really afford in the long term. Perhaps they will even say tell the client to come back and refinance in a year — and they neglect to mention that they will rack up another fee to do so!  They have ruined the credibility of programs meant for special circumstances by abusing them and the homeowners they sign up for them.  “Stated income” loans?  A necessity for those who are small business owners or paid largely in tips!  Not intended for Joe Average (or his mortgage broker) to lie about how much money he makes so it looks like he can afford a house that he really can’t afford!

A similar unscrupulous minority of real estate agents. I’ve talked a little about them before.  Some agents fixate on the fact that they don’t do a lot more to sell a $200,000 home than a $100,000 home but they get paid as a percentage of sales price.  So some agents try to steer their clients up-market regardless of what they can afford. Agents like this don’t consider the effect this will have on their future business. You never know whether that guy you helped (or didn’t help) with the $100,000 home will just happen to be talking to somebody who needs help with a $500,000 home.

Appraisers in a Catch-22.  Make no mistake, appraisers found themselves in a tough place a few years ago, particularly in the hottest markets. They were being paid to say yes! Yes! That house may have only been worth 80% of that last year, but it’s worth that now. Yes! An almost identical house on the next block sold for $20,000 less two weeks ago but this house is worth even more now.  They weren’t going to get any business from their mortgage broker clients if they didn’t at least try to come close.  At $300 a pop, they had to do what they had to do.

Overly enthusiastic buyers. Motivated by greed for rising housing prices and fear that they would be priced out, some buyers over-extended themselves. They never thought housing prices could go down.  They refused to “just say no” to that house they love but just can’t afford.

Government programs to artificially stimulate housing demand.  I’m not going to criticize the mortgage income deduction here, despite the fact that it’s the only “investment” that the tax code favors. Rather, I am quite critical of programs for first time homebuyers. President Bush has made widespread home-ownership a priority of his Adminstration as part of his Ownership Society and as a result has spearheaded several such initiatives.  Unfortunately, there wasn’t really enough information and education to go with these initiatives. There are many things first time home buyers do not know and perhaps have never thought about. I think some of these buyers ended up in over their heads with homes in need of more repair than they knew how to handle,  with bills they didn’t anticipate, perhaps in neighborhoods that were not what they first seemed.  By the time they knew they were in over their heads, it was much too late.

And last but not least, the only individual I will single out.

Phil Gramm. The then-senior Senator from Texas is the prime architect of the banking deregulation resulting in “too big to fail” institutions. His further work deregulating the comodities and futures markets made possible the labyrinthine transactions that make it impossible to know just how big the housing problem is, nor how long it will take to completely play out. Further, the modern complications Senator Gramm’s deregulation allowed make it difficult for mortgage providers to modify mortgage terms to prevent foreclosures without violating contracts with investors who have purchased part or all of the paper.

While there are certainly other culprits, these are some of the biggest.

Cross-posted at TheModerateVoice.

The Review-Journal reports that not only have local pre-foreclosures dropped, we have fewer bank-owned properties too.  Of course, that’s only a drop from the previous month;  we’re still way up over last year.  Nor is Vegas unusual, as we are more-or-less in line with the nationwide numbers.

Could it be that all the various foreclosure prevention initiatives are working?  Is it possible that the majority of people who were going to lose their homes have already done so?  Could this be a sign that the economy is improving in general?  Do we dare hope that the housing market is returning to “normal”, with short sales and REO properties being the rare exception instead of a force dominating the housing supply?

It is hard to know whether this means we are coming out of the housing storm, or whether it’s just a lull.  Nevertheless, I am happy to hear that we have fewer people in imminent danger of losing their homes.

Rather than waiting for a government solution, Citi is joining institutions such as Bank of America and J.P. Morgan in preventing foreclosures.  It is estimated that the Citi effort alone will prevent 130,000 foreclosures on $20,000,000,000 of mortgages.  That’s $20 billion, or $20,000 million.  In addition, they will actively reach out to a half million homeowners who aren’t actually behind on payments, but might be at risk of falling behind in the future.

Help from Citi will include rate freezes, rate reductions, principal reduction, and/or entending the term of the mortgage itself to make the payments more affordable according to CNN.  Of course, not all homeowners will qualify for help from Citi. To qualify, a homeowner must be current on payments, be living in the home, and must be able to make what is described as a “reasonable payment.”  In addition, Citi has to actually own the mortgage itself — it cannot have already been sold off to investors.

If you are behind on your mortgage, or near the brink of being so, please look into your options.

And if you are considering buying a bank-owned property, be sure to check out the story of Peter Hong, via The Mess That Greenspan Made. The only thing I’d like to point out is that I have one disagreement with Mr. Hong’s statement on “lowballing“.  He quotes an expert as telling him “If a home you want has been on the market for several weeks, it is probably overpriced”.  While that might be so in Los Angeles, it is not so in Vegas.  At least in Vegas, there is a lot of fairly priced REO action and you are unlikely to get a home by lowballing.  First, most — most – banks have a policy of regular price cuts;  if it isn’t moving, they will drop the price untl it does.  Second, on the market a few weeks is no big deal when you have several months worth of housing on the market. And finally, I have seen properties on the market for several months suddenly get multiple offers.  There is just no way to tell when the “right person” is going to see a house.  My advice on making offers is to a) know your budget; b) ask your Realtor to run some “comps” in the area; and c) find out if any comparable homes have sold in the last 6 months and for how much (don’t forget to compare that to the asking price).  This advice should still be good no matter what happens to the housing market in the future.

Update: the Bush Administration should be unveiling its own foreclosure prevention scheme centered on Fannie and Freddie later today.

It is true that the number of single family homes available in the GLVAR MLS system is up from where it was last month.  However, it is also true that it is the 4th straight month of 3000+ actual closed sales.  We also have over 2000 “pending” (contract is signed, contingencies removed, just waiting for close of escrow) and an additional 3200 “contingent”.  There are lots of things that “contingent” can mean, ranging from “waiting for short sale approval” to “inspecting HOA documents” to “oops, forgot to change it to pending!” Some contingencies are easier to overcome than others. Nevertheless, most of these homes will close within 30-60 days.

Why then is the number of available homes up?  I think there are several factors at play, including more foreclosures, more people trying to work out a short sale with their mortgage holder, and private sellers returning their homes to the market because they are encouraged by the number of homes actually selling.