In other news: critics don’t think the foreclosure fraud settlement goes far enough (no kidding); Morgan Stanley is being sued for allegedly luring customers into HAMP programs they knew they weren’t going to approve; the Census shows we’re the most vacant city in the nation but how are they counting vacant units?; we’ve got a whole year of monthly increases in the number of visitors (good news!); and I do truly hate the cheerleading tone — I don’t want you to think I’m one of those “It’s a great time to buy a house” bobbleheads! –  but some experts think there’s never been a better time to buy a home in Vegas.

Many economists believe that a significant number of workers will have to move before the employment picture substantially improves.

But workers have proved unwilling — or unable — to relocate. The biggest factor seems to be the large number of unemployed homeowners who have little or no home equity.

This graph should put things in perspective: just about anybody who bought in the last 10 years is underwater, and things may get worse — which some economists think will put us back in a recession (if you in fact believe we really ever got out of one). This is another argument in favor of allowing bankruptcy judges to “cramdown” mortgages.

But here’s a fellow who sees potential good in our underwater home trap:

Out of nothing more than self-preservation, those people will come up with something—maybe the next Zappos or something equally huge?—to get us out of this jam. More important, though, is the part that will come: recovery. And, yes, there will be one someday.

Finding a way out of this mess, he argues, is likely to form a greater sense of community.

Be sure to come back tomorrow afternoon for Friday Figures!

It’s also true that the drop in housing prices has meant that Realtor’s commission checks are smaller than they used to be. Strangely enough, I find it encouraging for the Review Journal to print quotes like this:

“So you’d better have a different job because there are 12,000 agents and maybe 500 or 1,000 are making it along and the others are not,” [Real Estate Agent Joe Stewart] said.

Actually there’s over 16,000 licensees in Clark County according to the Real Estate Division. Not all of them are Realtors. As peculiar as it seems, I am looking forward to seeing the number of Realtors in the Valley decline. Hopefully the ones of us that are left will be the smartest and the best.

In addition, we have roughly 300 jobs being created by a solar manufacturing plant.

Both these may seem small in a city where a single hotel-casino might have thousands of rooms and a huge list of employees. But it also represents diversification, critical for a city like Vegas.

Since the President is showing up in the foreclosure capital of America, I would like to hear what he’s got to really say about the fact that mortgage delinquencies are at an all time high. With Nevada’s unemployment rate higher than the national average, what would he like to say about job creation? Because let’s face it, there is no permanent solution to the mortgage and housing problem until people have reliable jobs.

Update: Mr. Goodman has indicated that he will accept an apology from Mr. Obama, as long as it includes buying him a martini. Mr. President, Mr. Mayor takes Bombay Sapphire.

Most of my colleagues really want that tax credit extended, or even expanded. They see a lot more potential sales. However, I have several concerns.

First, if the Feds keep extending the credit, potential buyers will lose the sense of urgency they have had this year. If the credit is improved, either by making it a bigger credit or my expanding who is eligible, the problem gets worse as potential buyers may hold off waiting for the Feds to offer an even better deal.

Second, all those first time buyers have created an artificial “mini-boom”, accounting for 42% of sales in September. They are particularly snapping up foreclosed homes (adding to the froth, and buying homes that may have serious problems that they don’t even know might be problems). On the surface, this sounds like an argument for extending the credit: can your market afford up to 42% of buyers going away? Surely prices are headed for a slump in December if the tax credit isn’t extended! The flip-side of this argument is this: how many qualified first time buyers are left?

This brings me to the final point. How many qualified buyers are there at all? Here in Nevada, we are dealing with an unemployment rate of 13.3%, and it’s up to 13.9% here in the Las Vegas Valley. The national numbers are only slightly better. People without jobs rarely qualify for mortgages. That means that well over 1 in 8 people in Nevada couldn’t buy a house if they wanted to, regardless of tax incentives. It also means that over 1 in 8 people is at risk of falling behind their current housing payment, regardless of whether it’s a mortgage or a rent payment.

Let’s work towards the long term health of the real estate market, not a short term fix.

Meanwhile, Bigger Pockets points out that although our sales are way up, our real estate market is dominated by bank owned properties and short sales. In his words, “pity the retail seller“! It is still very difficult for Joe and Jane Average to sell a Vegas home right now.  Not impossible, just difficult.

This problem isn’t unique to Vegas, either. Very few people are selling homes and “moving up” unless it is an absolute necessity (job transfer, etc). A lot of current buyers are first time buyers — who don’t need to sell a home before buying another one. I am still seeing a lot of investor activity, but it’s mostly small investors hoping to get in on the same great deals as everyone else. The experienced “fix and flip” people are out there;  some homes they have purchased and renovated appear in the MLS. However, most of the investors that call me are looking for something cheap, in good condition now, and rentable.

Nationwide, it is true that home sales are up. Inventory is up too, as private sellers start to think a sale is possible, underwater homeowners come to the conclusion that a short sale is better than being foreclosed upon, and banks release more inventory for sale. If you believe in the “phantom inventory” theory, you should expect to see Vegas inventory of bank-owned homes jump from current levels at least 20% (another 1000 REO listings) by the end of the first week of July (June is the end of the accounting period for most businesses including banks). Some people see no sign of a bottom soon.

While I wouldn’t dream of speculating about the national housing picture, I do see good signs locally. Our local economy is not terrific, but we still do have toruism and other industries. Since the supply of bank-owned houses is finally shrinking, there is a chance to move through some of the other inventory. I do think we are putting in a bottom in prices (except on severely distressed homes that need a great deal of work), although that process may take a few months. I am concerned that the fever I see to “get the best deal” may be a mini-bubble.  It is clear that we won’t be able to say we have a full recovery until the pool of buyers is more balanced: we need experienced buyers who are upgrading or downsizing or relocating; we need investors both to rehabilitate severely distressed homes and to increase our rental inventory; Realtors need to proatively educate potential first time buyers about how to become homeowners and what to expect along the way.

You may recall that the Governors of both Nevada and California were actively encouraging a high speed rail link between Vegas and Los Angeles. Unfortunately, that link just isn’t on the map at this time. 

Las Vegas has a long history when it comes to railroads. It was the major stop between Salt Lake City and Los Angeles at one time. Our economy was nearly ruined when the hub was moved after a railway workers strike. In this age of air travel and interstate highways, the lack of this rail link won’t have that sort of impact, but it would have gotten hundreds of cars off I-15 and been a good thing for both cities. Let’s hope this is just “phase one” of the rail map.

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.