It must be nice to be a Congressman. They’re already out for the Independence Day holiday. Of course they left a few little things undone. Like, say, that bill that might have helped homeowners and mortgage companies prevent some foreclosures. Don’t get me wrong, the ideas on the table were far from perfect, but they were better than nothing.

Vacant homes — abandoned, foreclosed, or simply waiting to be sold — are now a serious problem in many communities across the nation. It’s no longer just an “inner city Detroit” sort of issue; even “nice” neighborhoods have boarded up homes that attract parties, drug use, vandalism, and theft.

However, even if we had enough buyers for these properties, there is the problem of getting the money to purchase (and renovate where needed) all those homes. We still have a “credit crunch” where many banks don’t have money to lend. Some of them over-extended credit to construction firms that were themselves overextended. Some of those builders have slashed prices just to raise capital, and in the process slashed market values in the neighborhoods they were building.

But today there is more to talk about than doom and gloom. Today in the Greater Las Vegas Association of Realtors (GLVAR) MLS, we have 21,390 available homes, 16,806 of them Single Family Residences. This level is high, but stable. In addition, we have 7,032 homes that are “contingent” or “pending”. These homes have signed purchase contracts, and the overwhelming majority of them will close within 30 to 60 days. However, the sale is not final yet. Of the available homes, 11,171 are currently vacant (54.7%); 5,809 are short sales (27.2%); 4,737 are REO/foreclosed/bank owned (22.1%). All those percentages are up over last month, and they represent “motivated sellers.” These figures must be taken along with these (courtesy of our friends over at Frothing Developer): taxable sales in the Valley are up (meaning economic growth, and the promise of more jobs); home sales are better than they were this time last year; and despite a regional “recession”, net new residents of 4,600 in May. That’s a slow way to fill those available homes, but it’s better than nothing.

Yesterday, the International Times Herald ran a Bloomberg article called Defaults in Las Vegas turn investment banks into decorators. I can only imagine the number of signatures that have to be gathered to actually change a paint color! Here’s an excerpt:

Since January, when Ian Bruce Eichner, a New York developer, defaulted on a $760 million loan, Deutsche Bank has been giving Perini a monthly check for $70 million to continue construction. It is now in full swing with 2,800 workers on site and a dozen cranes towering overhead.

Deutsche Bank, which declined to comment about the Cosmopolitan, is one of a dozen investment banks that rode a five-year boom in commercial real estate by financing developers and landlords while profiting by packaging loans into securities. But credit markets seized up in 2007, sticking banks and brokerage firms with commercial mortgages and bonds. The amount for large U.S. banks alone reached $169 billion, according to Fitch Ratings.

The Cosmopolitan is clearly worth more to Deutsche Bank as a finished product than a construction site. It’s still scheduled to open in late 2009.

But the Cosmopolitan has other problems too: Cosmopolitan Magazine is suing them over their name! Hearst Publications insists “the Cosmopolitan development has tried to confuse the public into thinking the project is associated with the publishing company.” Now I don’t know about you, but I don’t see how I can confuse the two. Here’s what the Cosmopolitan will look like. Now, here’s what Cosmopolitan Magazine looks like.

Next thing you know, they’ll be forcing bars everywhere to pay a royalty every time they serve a Cosmo.

Some time back I mentioned that many countries do not have the same level of regulation for real estate agents that we have here in the United States. Did you know that many states model their rules for real estate salespeople and brokers in part on the National Association of Realtors’ Code of Ethics? Well, in Britain, there is a movement to institute basic minimum qualifications and standards for “estate agents”, including a regulatory body and what appears to be disclosure requirements.

Maybe you remember when I wrote about Barbara Ehrenreich getting it wrong? Now Brad DeLong says she “has gone totally off the rails” when she insists that only the rich can afford to live in beautiful places. I suppose a lot depends on what a beautiful place means to you.

Objective data — actual real figures — show that the Las Vegas real estate market is getting better, thank you very much, with 3000 pending sales and an additional 4000 contingent.

As for the much hyped RealtyTrac figures that 1 out of every 118 Nevada homes got a foreclosure notice in May, that figure seems a bit odd. The last time I found a foreclosure figure “odd” it turned out to be totally bogus. Their figures also indicate that “Nearly 74,000 properties were repossessed by lenders nationwide in May, while more than 58,000 received default notices,” while Foreclosures.com said that nationally, “Lenders took possession of 74,570 homes in April, down more than 5 percent from March….” They also found that “Clark County had 4,426 preforeclosures in April, more than double the 2,029 preforeclosures in the same month a year ago. The number is down from a record 6,152 preforeclosures in March. REOs, or real estate owned by the lender through foreclosure, declined to 1,911 in April, compared with 1,937 in March.” In fact, you can see their stats right here: Nevada had 4,985 new foreclosure filings in May, compared to 5,177 in April and a high of 6,876 in May. And they saved me the trouble of adding up the number of homes total in each county: 742,752 total homes in the state. One out of 149 homes is still alarming, but improved. You can click on Nevada to get a county-by-county list: Clark County as a whole had 24,585 foreclosure filings year-to-date, including 4,222 in May as part of a 2 month decline, for a total of 4.80% out of our total 512,253 households. Keep in mind that many of the foreclosures from earlier in the year are already in the hands of the bank — and in some cases sold already. So the real news turns out to be both better and worse than originally reported.

And I promised a bonus: You know you’re a real estate investor when….

That’s all for today. Make it a good day.

No Crown for Vegas: Back in December, Clark County approved the Crown project, which would have been the second tallest structure on the Strip. This week, “Company officials said the recent upheaval in the world financial market caused the plans to be scrapped.” Furthermore, they will stop making payments towards purchasing the land for the project.

The truth about foreclosures: Just because the bank owns it and wants to not own it anymore doesn’t make it a bargain automatically. Buyers still need to do their research, Realtors still need to be aware of market conditions and advise buyers accordingly, and everyone needs to be aware that it takes patience to deal both with the bank and the problems that may arise.

Didn’t I already say this? Tony’s tips for curb appeal on foreclosure sales may be intended for REO agents (who are experienced listing agents or the bank would never call them) and investors who have purchased property from banks (see above). But they still hold true for Joe and Jane Average as they try to sell their home.

Your Friendly Neighborhood Licensee: I bet there’s at least one Realtor that lives in your neighborhood. Heck, there’s at least 3 on my block! Odds are very good that there’s a Realtor or two that takes a vested interest in your neighborhood, even if she lives miles away. She sends newsletters, she knows every house that’s been available for the last year, she goes door to door, maybe she goes to HOA meetings and organizes neighborhood garage sales. Well, she probably does genuinely like the neighborhood — particularly if she chooses to live there! — but the truth is she would like your business too. It’s a win-win situation, because chances are she knows and can highlight the great things about the neighborhood and the homes in it better than any agent in the area.

Lies, Foreclosures, and Gratuitous References to Adult Parties: The Hopps of Florida weren’t the only people making money off the real estate bubble — in fact, I think you could argue that if their actions involved securities, the SEC would be investigating them for “pump and dump“. In fact, many areas had somebody involved in the same sorts of schemes, where homes were bought for no-money-down, taking mortgages for more than the purchase price, and hoping to get out quickly. The Hopps might have been nothing more than a footnote if it weren’t for that one party making the news. The moral? I don’t know, defraud people and corporations as much as you like, as long as everybody keeps their clothes on?

I normally talk general econ over there, but….: Tim Iocono has some things to point out regarding the relationship of real estate holdings to overall net worth of American households.

I won’t bore you with the various conflicting stories I have seen this week regarding the state of the real estate markets. They range from “things will deteriorate for at least another year or three” to “we should see a bottom in the next 6 months” to “we are bottoming now” to “what are you talking about prices have already started to rise again in some places.” But you know how Tip O’Neill said “all politics is local”? Well all real estate is too. And locally, supply is declining. Sometimes when I do “floor duty” (answering real estate inquiries at the office for people who do not have Realtors), the phone rings regularly with people who want to buy. Econ 101 says that when supply declines and demand remains steady — or rises — prices go up.

I hope everyone has a great weekend.

It has been brought to my attention that the Times of London did a piece on Las Vegas foreclosures. In fact, they did two! But I digress. When you have quotes like this, you really need to watch yourself:

Gail Burks, the head of the Nevada Fair Housing Centre, a citizens advice bureau, said that home rage had become common in Las Vegas as dispossessed homeowners vent their frustration. “There have been five foreclosures on my street, three of which ripped everything out. This kind of thing has an impact on the wider community,” said Ms Banks, who receives about 600 requests a month now for advice on foreclosure, compared with about 200 in October last year.

There are 28,655 vacant properties on the market in Las Vegas as a result of foreclosure, Ms Banks said. Elsewhere, planned residential houses have been put on hold as demand and financing evaporates.

Needless to say, when someone starts tossing around extremely specific factoids that tend to indicate that there are thousands of vacant, bank owned properties just waiting to hit the market, I have two thoughts. First, “that sounds unlikely.” Followed by “But if it’s halfway true, there is a terrifying opportunity out there.” Now, those of you who followed me over from ShortWoman know that I am trained as a researcher. So I did some research.

First up, let’s decide how to spell the woman’s name, shall we? Burks or Banks? The editor let this pass? A quick visit to the Nevada Fair Housing Center’s website gives us a good place to start. I mean, beyond the fact that gratuitous sound in a website is never a good thing. According to their annual report, the woman’s name is Gail Burks.

The other thing you may have noticed about that annual report is that it’s from 2004. In fact, the most recent changes I can find to the site are from 2006, in the press releases section. Speaking of press releases, I am not seeing anything from which the Times could have gotten their “data” in this section.

I continued poking around the internet, and found this gentleman’s excellent two-part “deconstruction” of the Times’s article. Here’s the best part:

That’s a good one.

First: There are only 22,434 units available for sale in Las Vegas, as of the 5/17/08 GLVAR MLS database.

Second: Many of those aren’t vacant.

Third: Probably less than 10% of these for sale units have gone through foreclosure. (That’s not to say there aren’t a LOT of foreclosures in the pipeline.)

Now, these numbers are good but not without fault. I don’t have the May 17 GLVAR MLS figures in front of me, but I do have figures from earlier in the month. And according to those, about half of the roughly 22,000 available properties in the MLS are vacant (~11,000). Furthermore, about 19% are marked as having been through foreclosure (in round numbers, 5500). It is safe to say that all these are vacant. Still, 28,655 minus 5500 is roughly 23,000 homes unaccounted for.

I am willing to believe there are maybe 1000-1500 bank-owned properties that have not yet hit the MLS, but I am not willing to believe that there are 23,000 properties that are foreclosed, REO (”Real Estate Owned” is the line on the bank’s asset sheet for these properties), vacant — and yet the bank is doing nothing to sell them. If this were true, not only would there be 4 REO homes sitting on the bank’s asset sheet costing them money for every one they have on the market. It would also mean that the banks are collectively able to double the number of homes on the market. As I said, a terrifying opportunity.

It is only fair to mention that roughly 25% of the homes currently in the MLS are “Short Sales”. Many of them are vacant. Many of them have already received a NOD — Notice of Default — that starts the foreclosure process. I point this out even though it doesn’t really get us any closer to that alarmingly precise 28,655 figure Ms Burks allegedly cites. Remember, I still can’t find any actual source for that; she may have said it over the phone to a Times reporter.

But this is even more damning: remember that CNN article where we learned that 1 in every 44 Vegas homes is in foreclosure? And remember, that figure represents homes in every stage of foreclosure from Notice of Default to bank owned; many of these will still be occupied. 28,655 (vacant due to foreclosure homes) times 44 (homes for every one in foreclosure) is 1,260,820 total homes. Only 1.9 million people live in Clark County, and 283,221 are students in Clark County School District (unlikely to be homeowners).

Furthermore, in December of 2008 there were only 581,495 single family homes, 19,317 multi-family homes (condos and apartments), and 28,457 manufactured homes in the county according to the assessor’s office, which ought to know these things. The Times asks you to believe that one out of every 22 homes is not only in foreclosure, but vacant as well. While it may seem like this is plausible in some neighborhoods, it does not play out over the entire metropolitan area.

I am beginning to think that in addition to getting her name wrong, they may have misquoted her. Perhaps she said 8655? Perhaps the figure she used was for all of Nevada? Perhaps the Times should retract the article or get their facts straight.

In Florida, work is underway to syndicate a little reality show called The Foreclosure Shoppe. It follows the wild adventures of Realtor Tom Bruzzesi as he navigates the tricky waters of the REO world of bank owned property. His competitors call him “The Maniac.” As many strange things as I have seen, I can only imagine the weird things he encounters every day.

Also in Florida, the New York Times tells us about some enterprising guys who have set up business working on foreclosed properties. They inspect, secure, maintain, repair, and sometimes even clean up these properties for the banks that own them. Unoccupied homes can deteriorate quickly, particularly when helped along by vandals, moisture, and abandoned animals. On the other hand, banks have discovered that a few hundred or thousand dollars paid to companies like this can prevent problems and municipal fines, help them sell the property quickly, and in the end, save money.

Anyone want to bet on whether these guys know “The Maniac” by now?

Thinking of the Children:  Child advocacy group First Focus has reported that roughly 40,000 Nevada children will be affected by foreclosure.  This is part of 2 Million kids nationwide. Meanwhile, there are about 2,000 homeless teenagers in Las Vegas. Efforts are underway to get them “survival kits” that include “hand wipes, anti-bacterial hand gel, a toothbrush and toothpaste, shampoo, deodorant, sunscreen, bandages, socks and snacks.”

Looking for a really unique Vegas home?  Well, one is to be auctioned off in early June.  The garage alone is 6500 square feet, 2 to 4 times the size of a typical local family home.  The home itself is 9500 square feet on 2 acres.  Open house this weekend!  Opening bid is only a half million dollars, or $53 per square foot — excluding the garage. Twice this price would be a bargain by any local standard. Here’s a gallery of pictures.

“We must all hang together, or assuredly we shall all hang separately!“  (Quote from Ben Franklin): The Christian Science Monitor asks whether taxpayers will end up paying for the subprime mess one way or the other.

At least there’s one good consequence:  Our current real estate troubles are helping conservationists, both by scuttling projects in environmentally sensitive areas, and by making it easier for areas to be converted to parks and other conservation areas.

And finally, a cartoon:   “moral hazard.”

Have a terrific weekend, everybody!

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.

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!

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.