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.

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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Here’s a round-up of some interesting mortgage and financing stories that have crossed my desk:

This one by a local loan officer gives you a rather technical view of the impact on Las Vegas real estate from a particular kind of mortgage, the Option ARM. He’s an expert in this, so even if you find it tough reading, it’s worth your time.

This insightful commentary talks about predatory lending and mortgage modifications. In short, there are a number of reasons banks have not exactly been enthusiastic about getting Joe and Jane Average a lower payment!

FHA loans are now one of the most popular ways to get financed. But did you know that nationwide there are only 172 people who can give the final approval? What I take away from this is ask for a 45 day closing on FHA transactions, and think twice before buying a foreclosure with one! By the way, FHA is asking Congress for tougher standards, bigger downpayments, and bigger mortgage insurance fees. No word on whether they are asking for more staff.

One more thing, the Treasury Department did issue new guidelines on short sales this week. To learn more, check out my article on The Moderate Voice. There is a link to the actual rules near the end.

Be sure to join me on Friday for the latest Vegas real estate market data!

Deutsche Bank, who foreclosed on the Cosmopolitan project last year, is offering to refund up to 74% of the deposit money that would-be buyers put up. However, a lawsuit by those buyers has been filed:

Cosmopolitan’s developers also misled apartment buyers about completion delays, added units, insufficient parking and changes to the builder contract, according to an amended complaint filed in Nevada. The garage and “underground facilities are under the existing water table, requiring 24-hour pumps and containment walls,” it alleges.

It’s easy to forget that Las Vegas became a stopping place in the desert because of underground springs. Apparently that’s exactly what the developers did.

More courts are getting picky about mortgage documents when considering judicial foreclosures and bankruptcies. And it isn’t just state courts either; now at least one federal court is in on the action. More federal judges will have a chance to rule on these issues as a part of bankruptcy proceedings. It will be interesting to see if MERS turns out to be an issue in Nevada’s foreclosure mediation program (few foreclosures in Nevada actually involve the courts). If this trend keeps up, title insurance will be more important than ever when buying and selling real estate!

Remember that MERS is involved in as many as 60,000 mortgages nationally. I personally think that if more than a handful of these mortgages is invalidated, that Congress will be under great pressure from the banking industry to quickly push through legislation that clears MERS’s status and allows “business as usual” to continue.

Until that happens, savvy lawyers will ask for proof that the mortgage holder actually holds the mortgage in judicial foreclosure and bankruptcies.

The San Francisco Chronicle is noticing what I told you some time ago: some banks are insisting on an additional credit check or an additional mortgage pre-qualification if you want to buy their foreclosed homes. In an environment where multiple offers are the norm, a buyer might end up needing 3 or 4 pre-qualifications, often paying a fee and always getting putting another inquiry on the credit report. But buyers are tired of strong arm tactics from banks:

The Hayeses found the requirements sufficiently infuriating that they decided not to submit offers on some properties they had been considering, and are now in contract to buy a nonforeclosed home from a traditional seller. Real estate agents say both practices – requiring fresh credit checks and steering potential buyers toward specific mortgage lenders – are increasingly common with many foreclosure sales.

In selling foreclosures, “we require either a credit pre-approval from another lender, other proof of funds, or a pre-qualification from Wells Fargo,” said spokesman Jason Menke. “We do not require that a borrower cross-qualify when they are considering a purchase of a short sale or REO property.”

Over the last couple of weeks, a huge mortgage and foreclosure story has been slowly developing. You’ve probably already heard about judges throwing out foreclosure cases because the banks didn’t have their documents in order. One judge in Kansas made a ruling that could — if upheld on the Federal level — invalidate the mortgages on 60 million homes. Judges in other states have already made similar rulings.

It goes back to the way mortgage companies have sliced, diced, and sold off mortgages into mortgage backed securities. This often involved a private company, a clearinghouse called MERS. Well, because it would be difficult for a consortium of 10 companies to file foreclosure, MERS did it for them. And this judge says MERS doesn’t actually have the legal standing to do that. In short, they can’t prove they own the mortgage because they don’t.

How do you find out if MERS is involved in your mortgage? That’s hard without getting lawyers involved. The best (only) advice on that I’ve heard is to call your mortgage servicer. The phone number should be on your statement. Ask the nice person at customer service. The problem is they may not know, and even if they do they may not be allowed to tell you. I know it seems like you should have a right to know, but that nice person in customer service doesn’t want to lose his or her job by telling you.

It is pretty easy, however, to tell if Fannie Mae or Freddie Mac holds your mortgage, and Forbes tells you how.

Both the good news and the bad news comes complete with pictures. I’ll start with the good news.

Even the Case-Shiller figures indicate that housing prices nationally are stabilizing. Vegas is the two lines at the bottom. Part of this is generally thought to be due to the tax credit for first time buyers, which will be expiring soon. Frankly, if you don’t already have at least a counter-offer in hand, don’t count on closing on time. Will that tax break be extended? Nobody knows.

The bad news is that Fannie Mae reports that serious mortgage delinquencies are up. In fact they are up sharply. Note the “hockey stick” part of the chart: since January of 2008, the rate of homeowners with Fannie Mae loans went from 1% — which was alarmingly high at the time — to over 4%. This tells me that distressed sales will dominate real estate for at least another couple of years.

Frankly, that bodes ill for price appreciation for the next 5 years. Those seeking a home that costs about the same as their rent will still be fine, and savvy investors will always be able to find a good deal, but this is the wrong time to be a speculator.

I am a real estate professional and homeowner in Las Vegas, NV. As you surely know, Vegas has been hard hit by foreclosures. We continue to have a high number of foreclosures in process and a substantial number of bank-owned homes available in our local real estate market. All the major banks and mortgage servicers have homes for sale in our area: Wells Fargo, Bank of America, Deutsche Bank, Chase, etc.. In addition, they are lien holders for the thousands of additional homes owned by people attempting a “short sale”. Thus, the banks collectively control over 75% of our real estate market before even considering their role as a lender for new sales.

The banks are using this position to further drive down prices, and exacerbate the decline in property values. This is a direct threat to Americans’ retirement accounts and municipalities’ tax rolls. Moreover, it has the potential to drive builders out of business altogether as it is impossible for them to compete with ludicrous prices well under $100 per square foot.

Banks are setting prices locally around $70-90 per square foot for nicer foreclosed single family homes that need a minimum of work. For under $60 per square foot, the property needs serious work but is still habitable. Only once a property is priced under $45 per square foot are homes “gutted.”

The initial low price is designed to bring in many offers in a short period of time – often dozens and sometimes over a hundred in just a few days. This feeding frenzy of bidding is hidden under most MLS systems. While locally, the final sales prices is a matter of public record, that is not true everywhere. The bank’s goal is to quickly get rid of the property no matter what, minimizing maintenance/utility costs, taxes paid, and homeowner’s association fees due.

This combines with the new appraisal rules in a toxic fashion. Under HVCC, many inexperienced or out-of-area appraisers are choosing to use these artificially low priced homes as comparables to non-distressed sales. They do this without regard or even knowledge of the condition of the properties in question. In one recent case, an appraiser compared a home that had been recently renovated to a home that was in desperate need of work. Thus, the values of all local homes are deflated by the big banks dumping inventory.

This practice is almost certainly not limited to our local market. These issues threaten the long term housing stability of our nation. Banks collectively control our markets, and they must be made to “play fair” rather than distorting prices for short-term gain. I have not even addressed the abusive practices of banks towards the potential buyers of these homes: mandatory pre-qualification with the lender that owns the property; contract addenda that strip the buyer of many protections they have under their original purchase contract; capricious and arbitrary closing dates. Nor have I addressed the bank-imposed labyrinth of frustration faced by all participants in a short sale.

If any other industry attempted these business practices, the Federal Trade Commission would investigate sanction them. As much as the various states would like to come down on these and other abusive activities, the big banks are federally regulated and thus almost untouchable by state authorities. It is time for the Feds to investigate the big players in the foreclosed property market, punish those whose actions hurt both home owners and home buyers, and make sure that all parties follow the law.

Thank you for your consideration.

With the Treasury predicting that millions more foreclosures are coming, it is clear that the markets will be dominated by the banks for some years to come. While foreclosure filings are up month-over-month, they are thankfully slightly down over last year.  No surprise that Nevada has the most foreclosures, although an 8% drop from last month is impressive.

The Review-Journal has chosen to spin our sales and availability numbers in a negative light, telling us that both sales and prices are down. However, even they have to admit that once you take pending and contingent sales out of the figures, actual inventory is down. A bright spot is the media coverage of short sales, which done right do save families and banks money by preventing foreclosure. Remember, it’s called a “short sale” because the bank will be “short” money at the end.

Foreclosures aside, we also have a big problem moving high-rise condos. This is particularly true of the developments on the Strip itself, where resale prices are down 50-70%. Great deals can be had for cash purchasers who want to be in the middle of everything.