Again in June, foreclosures hit Nevada harder than any other state

By Buck Wargo

Sunday, July 22, 2007 | 1:16 a.m.

Among its various dubious distinctions, Nevada's ironclad hold as the foreclosure capital of the nation seems secure.

In June the state had one foreclosure filing for every 175 households, to lead the nation for the sixth consecutive month, according to RealtyTrac, a California company that tracks foreclosures. That's almost triple the foreclosure rate in June 2006 and well ahead of second-place California, which had one filing for every 315 households.

The filings include bank repossessions and default and auction notices.

Among metropolitan areas, Las Vegas ranked sixth in the nation in June, with one foreclosure filing for every 138 households, according to RealtyTrac. (California cities reported six of the nation's top 10 metropolitan foreclosure rates in June, including the four ahead of Las Vegas - No. 1 Stockton, followed by Merced, Modesto and Riverside-San Bernardino. )

Nevada's and Las Vegas' foreclosure rates reflect investors speculating in a market that soured on them, and high-risk financing used by homeowners whose payments have increased because of adjustable rate mortgages, said Rick Sharga, vice president of marketing for RealtyTrac. The slowdown in sales and ongoing problems with risky loans won't ease the problem anytime soon, he said.

"It's probably going to get worse before it gets better," Sharga said.

That view is held by others who track the Las Vegas market.

Michael Krein, president of Nevada Real Estate Services, which works with banks in foreclosure proceedings, said he is handling 700 foreclosed properties and expects that number to increase when loan payments are adjusted upward later this year or in early 2008.

Homeowners who bought their homes with an adjustable rate mortgage have seen their payments increase 50 percent in some cases and others have seen their payments more than double, Krein said.

About 75 percent of the homes Krein has dealt with were purchased by speculators who hoped to benefit by reselling homes in an appreciating marketplace but timed it late and have walked away from their equity.

Foreclosures are occurring in every price range , but most of the houses and condominiums fall between $350,000 and $600,000, Krein said.

Devin Reiss, president of the Greater Las Vegas Association of Realtors, said the high foreclosure rate also reflects homeowners who stretched to buy with the expectation of refinancing their mortgages , but couldn't after the market softened and they owed more than their homes were worth.

"A lot of people bit off more than they could chew," Reiss said.

Local housing analyst Steve Bottfeld said he's seen one example in which one investor is responsible for 40 foreclosures.

The growing number of foreclosures adds homes and condos to an already bloated inventory, further weakening prices.

Given the slowdown in the market, Krein said , his foreclosure homes are priced 3 percent to 5 percent below comparable neighborhood homes.

"Foreclosures tend to be localized and so you see the impact in neighborhoods," Sharga said. "You could see some price depreciation in those areas."

A RealtyTrac study for CNNMoney.com showed the North Las Vegas ZIP code 89031 was the eighth worst in the country in the number of foreclosure filings. The area, which includes the Eldorado community south of Aliante, had 575 filings. There were 348 default notices and 100 bank repossessions.

The Las Vegas ZIP code 89131, which includes Silverstone Ranch and part of Centennial Hills, ranked 18th in the nation with 488 foreclosure filings. It had 105 bank repossessions, the most of any ZIP code in the valley.

As foreclosures increase, help may be on the way for homeowners. The Nevada Mortgage Lending Division, the U.S. Housing and Urban Development and others are working to establish a hotline for homeowners to get advice and avert foreclosure.

Banks are willing to renegotiate loans and more sellers are turning to "short sales," in which the home is sold for less money than the homeowner owes on the loan. In some cases, the homeowner owes the difference.

Local housing analyst Larry Murphy said 11 percent of the 25,000 homes listed on the Multiple Listing Service are short sales.

Other similar programs are forthcoming at the federal level, said Scott Bice, commissioner of the Nevada Mortgage Lending Division. But he said not everyone can be helped.

"If you have a $3,000 mortgage payment and you can only afford $1,500, there is not much help that can be provided to that person," Bice said .

A version of this story appears in the current issue of In Business Las Vegas, a sister publication.