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.

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.

I’ve updated the links, and added a section for Realtor Resources. Some of the other new additions include Frugal Vegas and the personal blog of former Secretary of Labor Robert Reich. One of his recent posts is on the housing bill currently in Congress.

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!

TheStreet.com asks and answers 5 Questions about the Mortgage Crisis.

Although you know my opinion regarding the local real estate market*, the question remains whether nationally speaking, we are at or near a bottom. Some people say yes. Some people say no.

* Inventory is slowly dropping, sales are slowly increasing, prices may continue to drop for another couple quarters.

If you’ve ever purchased a home, you have had a Realtor tell you that you should get a home inspection. Even if you rent or lease property, you may have had to open your door to an inspector performing “due diligence” as part of the landlord’s purchase/sale of the property. When you are spending hundreds of thousands or even millions of dollars on something, it only makes sense to make sure all is as it appears to be, right?

Well, as real estate values have declined, taxable values have declined in many places as well. The result is that many local governments are getting squeezed by lower revenues in a time where prices for just about everything but housing are going up. If you look closely, even the Fed has had to admit this was so. And in turn, that means local governments are having to cut corners here and there.

That brings me to today’s local newspaper, which informs me that Las Vegas Has Scrapped Some Structural Inspections. As nearly as I can tell from the limited scope of the article, the inspections involve the blueprints and plans rather than physically going on site and looking at the structure. I welcome comments from anyone who can correct me on this point, and will update this article accordingly. Honestly, I’m not worried about the safety of “strip malls… and big box stores” — the owner has too much to lose if it collapses and so much as injures a single person — but I have a little concern over the exemption for “tract homes”. Homeowners often don’t do the same kind of preventative maintenance that commercial real estate would have; not a big deal over the course of 5 years, but what about 20 years? A small problem can easily become a big one reaching across an entire neighborhood of homes in that time. At least one local lawyer “believes the city’s cost-cutting move could create more problems for local residents. He suggested eliminating the reviews would lead to more litigation over construction defects.”

While many experts feel that these inspections were duplicating inspections that also occur on the state and/or county level, it’s still a good idea to remind everyone that the last line of defense when it comes to avoiding a real estate nightmare is the property inspection.

Of course, there are some things that you can look for yourself and decide whether a property is even worth considering. Your level of “handiness” and willingness to do a lot of repairs will of course come into play. That being said, here’s This Old House’s Tommy Silva on What to Look For Before the Home Inspector Arrives and 18 Red Flags from Samuel Tamkin, who notes that “Of course, all of these problems can be fixed but for a price.”

As for choosing an inspector and what that inspector will do, here are some resources to get you started. Your broker’s office may have a list of inspectors that they have done business with in the past, and more information about the inspection process.

It’s a Caveat Emptor kind of world out there. Protect yourself with a property inspection when buying real estate.

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!