When you see someone write something like this, you start to worry about our real estate market:

Las Vegas foreclosures are expected to rise further this year with the planned release into the Nevada market of about 6,000 foreclosure homes by Bank of America over the next several months. According to a BofA executive, the foreclosures could be released at about 500 units a month.

The properties make up part of the so-called shadow inventory held by banks while they negotiate short sales or loan modifications with borrowers or while they wait for more favorable pricing trends.

But let’s look at that more closely. An additional 500 available units per month isn’t a big deal when average time on market is low, as we currently have. Whether Bank of America actually has 6000 foreclosed homes to put on the market is another issue. I suspect that at least half of those are currently already available as short sales; changing the status from short sale to REO does not change the amount of available inventory. More interestingly, this means they are admitting that a lot of short sale applications will be declined.

But here’s where they go astray, and why I know they are wrong:

Concord [Group of California] said that currently, Las Vegas has a supply of 16,215 residential units for sale, 8,845 units of which are bank-owned homes, HUD homes and other types of foreclosures.

It’s been a long time since we had 16,000 available units, let alone 8800 bank owned homes available. Regular readers know that last Friday we had just over 11,000 available units, only 2100 of which were bank owned. You can’t even explain the 16,000 figure they used by adding in contingent sales or short sales. We haven’t had that many available units since February of last year, and even then we didn’t have 8800 bank owned units!

Once more, you can’t believe everything you read about “shadow inventory” and how terrible the real estate market is in Vegas.

Maybe you didn’t know that you can’t use an FHA loan to purchase a property that has been owned by the seller for less than 90 days. Or at least, that’s the rule until February 1.

The purpose of this rule is to prevent “flipping,” buying a property and then immediately turning around and selling it for more money, pocketing thousands of dollars in a couple of months with little actual work on the property itself. Of course, the market downturn put a stop to most of that but the rule remains.

There is one huge loophole already in this rule. It doesn’t apply to sellers who are stare or federally chartered banks, and it doesn’t apply to HUD itself. So you can (theoretically) use an FHA mortgage to buy a newly foreclosed home from Wells Fargo or Nevada State Bank, but not Vinnie’s Pawn and Loan or Joe’s Mortgage Company. So will suspending this rule do what HUD says it will, “speed the resale of foreclosed properties“? Maybe.

There is another class of investor who sometimes gets hamstrung by the 90 day rule: investors who buy cheap, highly distressed properties. They quickly do the necessary repairs, paint and renovate, and sell the property for a profit. These investors are a necessary part of the foreclosure food chain, because they make homes out of properties that most buyers would never consider. Joe and Jane Average are not experts in repairing such properties, but these investors are. The temporary change to the HUD rule — and if successful, expect it to be extended — should make it easier for trashed out foreclosures to become owner occupied homes.

Welcome (or welcome back) to Friday Figures! All information from the GLVAR MLS system. This is the state of the local real estate market right now, and what you and your Realtor need to know before touring, making an offer, or listing a home in the Las Vegas Valley this weekend.

Summary: Available units are barely over 11,000 again. Notably, the supply of available condominiums and townhomes has dropped by a third in the last 6 months. The number of contingent and pending listings has stopped falling, insuring more closings in the future. The number of contingent short sales is still a concern, as many of these will not receive bank approval to move forward. Closings are solid, but a little lighter than levels we got used to before the end of the year.

Other Information: Here’s a great item on condo overbuilding. Of course it’s easy for everyone to see in hindsight, but local developers knew certain projects were doomed from the beginning. Of course 2009 Vegas property sales are up 36.9% from 2008, but we aren’t out of the woods yet. Nevada still has the top foreclosure rate at 10.17% (that includes everything from Notice of Default through bank owned and for sale) and bankruptcies are up by over 50%. While some temporary modifications are becoming permanent, some experts expect another wave of foreclosures after temporary modifications fail. Just in this morning’s news, we have found that HUD has denied a request for $367 million in stimulus funds for Southern Nevada’s Neighborhood Stabilization Program. While things are steady for now, there is the potential for storms to come.

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Maybe you’ve heard “the other golden rule,” that “he who has the gold makes the rules”? Nowhere is that more true right now than the real estate market: investors with cash are crowding out first time buyers, who are often interested in the same bargain properties, but must use conventional or even FHA financing. Here in Las Vegas, cash transactions accounted for roughly 40% of December closings! Cash offers are very attractive, particularly to banks trying to unload foreclosed properties, because there is less to go wrong: no lender to demand repairs prior to closing; no potential for a bad appraisal to derail the transaction; no chance of the mortgage simply falling through.

Oddly enough, this phenomenon isn’t important enough to make the Wall Street Journal’s list of 5 real estate trends to watch in 2010. In the meantime, cash offers are still the most successful way to get a winning purchase offer signed.